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Replacing income tax with a consumption tax would see the super rich pay even less tax as they spend a smaller percentage of their income compared to those with

by zizee 16y ago

Replacing income tax with a consumption tax would see the super rich pay even less tax as they spend a smaller percentage of their income compared to those with a lower income. [edited to fixed a typo: "the" => "they"]

meric 16y ago
What it means is... The first $5000 of consumption will be tax free, the next $10000 at 5%, and the next yet at 15%, etc. So, the super rich would indeed pay a smaller percentage of their income, only if they spend the same as an ordinary consumer, but they would pay much more tax (e.g. 60% after 1 million) if they spend everything they earn. This would encourage them not to swap pieces of paper for real goods. It would make them have more money in the bank but less million dollar cars and yachts. The productivity saved from not producing those non-producing consumer goods can be used, e.g., on farming, so that food becomes cheaper for the general populace.
- zizee 16y ago
  I'm not sure how shutting down Porsche factories is going to make food cheaper? In western countries only a few percentage of people are in the business of producing food. By moving workers from building yachts into food production will not make food production cheaper. This plan would see the rich hording money, rather than spending it on luxuries. The kind of luxuries that are produced by western economies. When the rich spend their money on frivolous luxuries, it helps redistribute their wealth to the workers producing those luxuries.
  - meric 16y ago
    http://www.paulgraham.com/wealth.html http://www.paulgraham.com/wealth.html To take an example to the extreme, it would be wasteful if Warren Buffet hired 10,000 painters to paint a portrait of himself everyday. The GDP would go up, but it wastes effort, effort that can be allocated more efficiently. (Using his own example here)
DanielBMarkham 16y ago
Replacing income tax with a consumption tax would see the super rich pay even less tax as they spend a smaller percentage of their income compared to those with a lower income. I've heard this argument before, and this is going to sound pedantic, so I apologize, but just exactly how rich can you be if you don't spend your money on things? Or, put a different way, the rich only (bother us/owe more/are easy targets/need to pay up) because a) they don't have to work to live, and b) they buy and own cool stuff we want. Obviously being able to live without working is a goal for everybody, so I'm tossing that out. What I'm left with is that we identify rich people by the stuff they buy or own. Without that, you wouldn't really have rich people -- or if you had them, as far as their participation in society they would be just the same as anybody else. They'd be invisible -- both in their appearance and in their stress on the social fabric. So if you want to sack the rich, do it by taxing the things that we identify with being rich -- buying and owning stuff. That way -- poof! -- there are instantly less rich people in the world, and you've created a stable societal goal for people to strive for which kind of boils down to "make as much money as you need to not work" which is a laudable goal for every society, I would think. Right? Not trying to argue, just thinking out loud. I've spent some time thinking about this, and I think a consumption tax could be supported by folks no matter what their political philosophy or party. The idea is inherently less political than an income tax. Of course, we'll all get hung up on whether it should be progressive or not, but hey -- baby steps.
- yummyfajitas 16y ago
  The problem is that consumption inequality is not nearly as large as income inequality. If your desire is to soak the rich, you pick the statistic which gives you the broadest base for doing so - consumption is simply not that statistic. In the US, the rich have iPhones while the poor are stuck with iClones [1]. As for why we want to soak the rich, it's clearly not (a) - most poor people work very little (by choice). [1] Note: this is not my opinion on Android (I hate Steve Job's walled garden, and am very happy with my N1), but it is the opinion of several lower class people I know.
- philwelch 16y ago
  The argument for rich people paying more tax isn't because we don't like them, it's because government is expensive and we can't afford it without rich people subsidizing everyone else. Keep in mind that rich people also have more of a vested interest in maintaining the system, so it's not entirely unfair to them, either.

by zizee 16y ago

meric 16y ago

What it means is... The first $5000 of consumption will be tax free, the next $10000 at 5%, and the next yet at 15%, etc. So, the super rich would indeed pay a smaller percentage of their income, only if they spend the same as an ordinary consumer, but they would pay much more tax (e.g. 60% after 1 million) if they spend everything they earn. This would encourage them not to swap pieces of paper for real goods. It would make them have more money in the bank but less million dollar cars and yachts. The productivity saved from not producing those non-producing consumer goods can be used, e.g., on farming, so that food becomes cheaper for the general populace.

zizee 16y ago
I'm not sure how shutting down Porsche factories is going to make food cheaper? In western countries only a few percentage of people are in the business of producing food. By moving workers from building yachts into food production will not make food production cheaper. This plan would see the rich hording money, rather than spending it on luxuries. The kind of luxuries that are produced by western economies. When the rich spend their money on frivolous luxuries, it helps redistribute their wealth to the workers producing those luxuries.
- meric 16y ago
  http://www.paulgraham.com/wealth.html http://www.paulgraham.com/wealth.html To take an example to the extreme, it would be wasteful if Warren Buffet hired 10,000 painters to paint a portrait of himself everyday. The GDP would go up, but it wastes effort, effort that can be allocated more efficiently. (Using his own example here)

DanielBMarkham 16y ago

Replacing income tax with a consumption tax would see the super rich pay even less tax as they spend a smaller percentage of their income compared to those with a lower income. I've heard this argument before, and this is going to sound pedantic, so I apologize, but just exactly how rich can you be if you don't spend your money on things? Or, put a different way, the rich only (bother us/owe more/are easy targets/need to pay up) because a) they don't have to work to live, and b) they buy and own cool stuff we want. Obviously being able to live without working is a goal for everybody, so I'm tossing that out. What I'm left with is that we identify rich people by the stuff they buy or own. Without that, you wouldn't really have rich people -- or if you had them, as far as their participation in society they would be just the same as anybody else. They'd be invisible -- both in their appearance and in their stress on the social fabric. So if you want to sack the rich, do it by taxing the things that we identify with being rich -- buying and owning stuff. That way -- poof! -- there are instantly less rich people in the world, and you've created a stable societal goal for people to strive for which kind of boils down to "make as much money as you need to not work" which is a laudable goal for every society, I would think. Right? Not trying to argue, just thinking out loud. I've spent some time thinking about this, and I think a consumption tax could be supported by folks no matter what their political philosophy or party. The idea is inherently less political than an income tax. Of course, we'll all get hung up on whether it should be progressive or not, but hey -- baby steps.

yummyfajitas 16y ago
The problem is that consumption inequality is not nearly as large as income inequality. If your desire is to soak the rich, you pick the statistic which gives you the broadest base for doing so - consumption is simply not that statistic. In the US, the rich have iPhones while the poor are stuck with iClones [1]. As for why we want to soak the rich, it's clearly not (a) - most poor people work very little (by choice). [1] Note: this is not my opinion on Android (I hate Steve Job's walled garden, and am very happy with my N1), but it is the opinion of several lower class people I know.
philwelch 16y ago
The argument for rich people paying more tax isn't because we don't like them, it's because government is expensive and we can't afford it without rich people subsidizing everyone else. Keep in mind that rich people also have more of a vested interest in maintaining the system, so it's not entirely unfair to them, either.