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If you're using a regressive VAT tax to pay for UBI you are not redistributing wealth, you are disproportionately taxing the poor to distribute to themselves (h

If you're using a regressive VAT tax to pay for UBI you are not redistributing wealth, you are disproportionately taxing the poor to distribute to themselves (https://www.quora.com/Why-is-value-added-tax-regressive https://www.quora.com/Why-is-value-added-tax-regressive) much of which will be lost as the prices of goods increases to match equilibrium. Amazon won't "pay the tax" it will pass the tax along in the form of higher consumer prices. If the primary concern is tax evasion, there are many ways to improve this while still maintaining progressive taxation. And I'm sorry, but even if this would work, I'm still not going to be sold on the idea that the world should be lorded over by a few trillionaires from California.

3131s 7y ago
> If you're using a regressive VAT tax to pay for UBI you are not redistributing wealth, you are disproportionately taxing the poor to distribute to themselves (https://www.quora.com/Why-is-value-added-tax-regressive https://www.quora.com/Why-is-value-added-tax-regressive) much of which will be lost as the prices of goods increases to match equilibrium. Amazon won't "pay the tax" it will pass the tax along in the form of higher consumer prices. A flat value added tax is regressive, but a VAT itself is not inherently regressive. Imagine if we have a VAT on yachts and nothing else, does that disproportionately affect the rich or the poor? That's why Yang is proposing to exempt basic goods and raise the rate on some luxury items. Even under a flat 10% VAT paired with the UBI, you would only be worse off if you spend $120,000 yearly on items with a 100% pass through (the IMF's estimates on the average pass through under a VAT are much lower than this). > If the primary concern is tax evasion, there are many ways to improve this while still maintaining progressive taxation. You are going to need to specify a better alternative then. Again, a VAT has inherent properties that make it highly auditable and therefore easier to administer. A wealth tax, in comparison, is much more subject to misreporting because it relies on asset valuation. > And I'm sorry, but even if this would work, I'm still not going to be sold on the idea that the world should be lorded over by a few trillionaires from California. Do you want wealth redistribution or not? Yang wants to give individuals legal ownership of their own data and control over how it is used, so I'm not so sure that most of those California billionaires are all that fond of him anyway.
- harimau777 7y ago
  For sake of argument, could this inadvertently make it more difficult for middle class people to pursue goals outside of basic survival? It seems to me that many otherwise "normal" middle class people have one area, their hobby, where they own luxury products. That might be a sports car, a horse, a sailboat, ski trips, etc. Might a VAT tax on luxury goods make those products out of reach for the middle class? While I can understand taxing a billionaire who buys luxury products in every area of their life, it doesn't strike me as unreasonable for someone to have one area that they choose to focus their resources.
- barrkel 7y ago
  Taxing transactions other than capital purchases isn't going to make much of a dent in inequality. The reason we have such inequality is from capital income and appreciation. Taxing ordinary income or outgoings won't help much.
  - 3131s 7y ago
    Ok, fortunately Yang also wants to increase capital gains taxes to the same rate as income taxes. https://www.yang2020.com/policies/capital-gain-carried-interest-tax/ https://www.yang2020.com/policies/capital-gain-carried-inter...
    - StreamBright 7y ago
      It would make more people move to tax havens.
- crdoconnor 7y ago
  >Imagine if we have a VAT on yachts and nothing else, does that disproportionately affect the rich or the poor? Nobody? They'll buy yachts abroad.
  - notahacker 7y ago
    Yup. Plus talking about 'VAT on yachts' is nonsensical in the context of funding a basic income anyway. There are a lot of economically inactive people to fund and not many yachts being purchased; wealthy dynasties tend to consume only tiny fractions of the economic rents they can extract from the economy each year. Choosing a consumption tax as a means of funding a UBI ensures that the bulk of the net contribution towards funding it will be paid by the large numbers of people who spend most of their incomes on consumption - i.e the middle classes.
perfect_kiss 7y ago
Living in a VAT Post-Soviet country, I am not sure if that argument about "hitting harder the poor" is true, if VAT system is not specially aligned against the poor, which was the case in my country earlier times of Post-Soviet transition, but has changed recently. The thing about VAT is that it is multilateral, and applies to many types of business-to-business transactions as well to business-to-consumer, so all the suppliers in the chain pay their share, not only the consumer. And, given by pure numbers, the value provided by VAT paid by business is pretty significant. In some implementations (such as my country one), business share of VAT can not be less than final consumer's VAT, because consumer has paid VAT only once, while any producing business, was paying VAT for any transaction by any supplier. The argument about aligning VAT against the poor, is that, given corrupt government being in power, some business can easily avoid paying VAT, or pay only small percentage of it. This was (and, to some extent, still is) the case in my country (Ukraine), due to existence of so-called "VAT Refunds" scheme, which allowed many oligarchs to concentrate big amounts of value during 90s-00s. The scheme is easy as using non-market practices such as paying less VAT than their competitors, and being not punished then due to law loopholes passed by cronies in the state legislation. The new governments, after 2014 Maidan revolution, being pressured by country's civil community, and also the international community, have started to remove many types of "VAT Refunds" scheme loopholes. That's why many oligarchs already went bust, and many are going to, just because their enterprises are now required to pay their share of VAT, and can not survive competition in changed reality. So in reality, implementing proper VAT system requires powerful government, and also VAT does not survive lobbyism and cronyism.
- yonaguska 7y ago
  I really appreciate those points. > So in reality, implementing proper VAT system requires powerful government, and also VAT does not survive lobbyism and cronyism. This kind of kills the VAT being feasible here in the US. We have crazy amounts of lobbying and legal loopholes and while the US gvt is powerful, that's somewhat antithetical to the founding ideals of that.
- deleted 7y ago
  [deleted]
AnthonyMouse 7y ago
> If you're using a regressive VAT tax to pay for UBI you are not redistributing wealth Sure you are. Joe Teach pays $5000/year in VAT and gets a $10,000/year UBI, $5000/year is being transferred to him. Carlton Moneypenny pays $50,000/year in VAT and gets a $10,000/year UBI, $40,000/year is being transferred away from him. > much of which will be lost as the prices of goods increases to match equilibrium But then you would collect more VAT at the same rate, which would fund a larger UBI. By the time that reaches steady state it's a wash. On top of that, VAT is great for people who are in debt (i.e. the poor), because no more income tax means they can pay down their existing debt with money they would have otherwise lost to income tax. > Amazon won't "pay the tax" it will pass the tax along in the form of higher consumer prices. The party who pays more of the tax is the party whose alternatives have gotten worse instead of better. For an individual, saving has just gotten more attractive relative to spending, so Amazon will have to keep the price of that stupid knickknack lower in order to get people to still buy it instead of banking the money and collecting interest on it to spend next year. Meanwhile it's now the case that the tax applies to Amazon and not just their smaller, less international competitors, so Amazon would start losing business to them if they don't keep prices low by eating more of the tax. > If the primary concern is tax evasion, there are many ways to improve this while still maintaining progressive taxation. Not really. The primary problem is that shifting profits to other jurisdictions with lower taxes is easy to do and hard to prevent, and then there are no "profits" in the jurisdiction with the progressive tax, which turns the "progressive" tax into a massively regressive tax since the richest pay nothing. The best way to fix it is to make everyone pay the same rate (so the rich can't avoid it) and then make it progressive by giving everyone a fixed refund (UBI), which gives you the effective rate curve a progressive income tax is supposed to have except that international corporations can't avoid it by declaring profits in Ireland.

3131s 7y ago

> If you're using a regressive VAT tax to pay for UBI you are not redistributing wealth, you are disproportionately taxing the poor to distribute to themselves (https://www.quora.com/Why-is-value-added-tax-regressive https://www.quora.com/Why-is-value-added-tax-regressive) much of which will be lost as the prices of goods increases to match equilibrium. Amazon won't "pay the tax" it will pass the tax along in the form of higher consumer prices. A flat value added tax is regressive, but a VAT itself is not inherently regressive. Imagine if we have a VAT on yachts and nothing else, does that disproportionately affect the rich or the poor? That's why Yang is proposing to exempt basic goods and raise the rate on some luxury items. Even under a flat 10% VAT paired with the UBI, you would only be worse off if you spend $120,000 yearly on items with a 100% pass through (the IMF's estimates on the average pass through under a VAT are much lower than this). > If the primary concern is tax evasion, there are many ways to improve this while still maintaining progressive taxation. You are going to need to specify a better alternative then. Again, a VAT has inherent properties that make it highly auditable and therefore easier to administer. A wealth tax, in comparison, is much more subject to misreporting because it relies on asset valuation. > And I'm sorry, but even if this would work, I'm still not going to be sold on the idea that the world should be lorded over by a few trillionaires from California. Do you want wealth redistribution or not? Yang wants to give individuals legal ownership of their own data and control over how it is used, so I'm not so sure that most of those California billionaires are all that fond of him anyway.

harimau777 7y ago
For sake of argument, could this inadvertently make it more difficult for middle class people to pursue goals outside of basic survival? It seems to me that many otherwise "normal" middle class people have one area, their hobby, where they own luxury products. That might be a sports car, a horse, a sailboat, ski trips, etc. Might a VAT tax on luxury goods make those products out of reach for the middle class? While I can understand taxing a billionaire who buys luxury products in every area of their life, it doesn't strike me as unreasonable for someone to have one area that they choose to focus their resources.
barrkel 7y ago
Taxing transactions other than capital purchases isn't going to make much of a dent in inequality. The reason we have such inequality is from capital income and appreciation. Taxing ordinary income or outgoings won't help much.
- 3131s 7y ago
  Ok, fortunately Yang also wants to increase capital gains taxes to the same rate as income taxes. https://www.yang2020.com/policies/capital-gain-carried-interest-tax/ https://www.yang2020.com/policies/capital-gain-carried-inter...
  - StreamBright 7y ago
    It would make more people move to tax havens.
crdoconnor 7y ago
>Imagine if we have a VAT on yachts and nothing else, does that disproportionately affect the rich or the poor? Nobody? They'll buy yachts abroad.
- notahacker 7y ago
  Yup. Plus talking about 'VAT on yachts' is nonsensical in the context of funding a basic income anyway. There are a lot of economically inactive people to fund and not many yachts being purchased; wealthy dynasties tend to consume only tiny fractions of the economic rents they can extract from the economy each year. Choosing a consumption tax as a means of funding a UBI ensures that the bulk of the net contribution towards funding it will be paid by the large numbers of people who spend most of their incomes on consumption - i.e the middle classes.

perfect_kiss 7y ago

Living in a VAT Post-Soviet country, I am not sure if that argument about "hitting harder the poor" is true, if VAT system is not specially aligned against the poor, which was the case in my country earlier times of Post-Soviet transition, but has changed recently. The thing about VAT is that it is multilateral, and applies to many types of business-to-business transactions as well to business-to-consumer, so all the suppliers in the chain pay their share, not only the consumer. And, given by pure numbers, the value provided by VAT paid by business is pretty significant. In some implementations (such as my country one), business share of VAT can not be less than final consumer's VAT, because consumer has paid VAT only once, while any producing business, was paying VAT for any transaction by any supplier. The argument about aligning VAT against the poor, is that, given corrupt government being in power, some business can easily avoid paying VAT, or pay only small percentage of it. This was (and, to some extent, still is) the case in my country (Ukraine), due to existence of so-called "VAT Refunds" scheme, which allowed many oligarchs to concentrate big amounts of value during 90s-00s. The scheme is easy as using non-market practices such as paying less VAT than their competitors, and being not punished then due to law loopholes passed by cronies in the state legislation. The new governments, after 2014 Maidan revolution, being pressured by country's civil community, and also the international community, have started to remove many types of "VAT Refunds" scheme loopholes. That's why many oligarchs already went bust, and many are going to, just because their enterprises are now required to pay their share of VAT, and can not survive competition in changed reality. So in reality, implementing proper VAT system requires powerful government, and also VAT does not survive lobbyism and cronyism.

yonaguska 7y ago
I really appreciate those points. > So in reality, implementing proper VAT system requires powerful government, and also VAT does not survive lobbyism and cronyism. This kind of kills the VAT being feasible here in the US. We have crazy amounts of lobbying and legal loopholes and while the US gvt is powerful, that's somewhat antithetical to the founding ideals of that.
deleted 7y ago
[deleted]

AnthonyMouse 7y ago

> If you're using a regressive VAT tax to pay for UBI you are not redistributing wealth Sure you are. Joe Teach pays $5000/year in VAT and gets a $10,000/year UBI, $5000/year is being transferred to him. Carlton Moneypenny pays $50,000/year in VAT and gets a $10,000/year UBI, $40,000/year is being transferred away from him. > much of which will be lost as the prices of goods increases to match equilibrium But then you would collect more VAT at the same rate, which would fund a larger UBI. By the time that reaches steady state it's a wash. On top of that, VAT is great for people who are in debt (i.e. the poor), because no more income tax means they can pay down their existing debt with money they would have otherwise lost to income tax. > Amazon won't "pay the tax" it will pass the tax along in the form of higher consumer prices. The party who pays more of the tax is the party whose alternatives have gotten worse instead of better. For an individual, saving has just gotten more attractive relative to spending, so Amazon will have to keep the price of that stupid knickknack lower in order to get people to still buy it instead of banking the money and collecting interest on it to spend next year. Meanwhile it's now the case that the tax applies to Amazon and not just their smaller, less international competitors, so Amazon would start losing business to them if they don't keep prices low by eating more of the tax. > If the primary concern is tax evasion, there are many ways to improve this while still maintaining progressive taxation. Not really. The primary problem is that shifting profits to other jurisdictions with lower taxes is easy to do and hard to prevent, and then there are no "profits" in the jurisdiction with the progressive tax, which turns the "progressive" tax into a massively regressive tax since the richest pay nothing. The best way to fix it is to make everyone pay the same rate (so the rich can't avoid it) and then make it progressive by giving everyone a fixed refund (UBI), which gives you the effective rate curve a progressive income tax is supposed to have except that international corporations can't avoid it by declaring profits in Ireland.