5 ms·

Tax consumption, not wealth or income.

lifeisstillgood 6y ago
Generally that's considered regressive (so we all have to eat and eat about the same amount of food each day.) For jeff bezos the Tesco Extra Special range is a rounding error whereas for the bottom 10% it's a large fraction of daily income. taxing that basically taxes a large fraction of their daily income.
- srtjstjsj 6y ago
  Tax consumption progressively.
  - Thorrez 6y ago
    How would you implement that? Isn't consumption tax generally a sales tax? At the time of a specific sale it would be hard to find out the right tax rate.
    - dahfizz 6y ago
      You could have a large personal deduction. You could tax everything at the lowest rate at the point of sale but make people do the accounting and pay their real rate if they are in a higher rate. The "tax" at the point of sale would act like income withholdings do now. You could categorize good so that yatchs have a much higher rate than groceries. You could also come up with an average price for good so that really expensive e.g. clothes and cars are taxed at a higher rate than they are for "normal" goods. All it takes is some creativity.
      - Thorrez 6y ago
        It requires people to save receipts on everything they buy. People (in states that charge sales tax) already sort of are required to do this for goods they buy online that don't charge tax. The vast vast vast majority of people (every single person I've asked) evade this tax. I try to pay the tax myself (I'm the only person I know who does this) by going through online receipts, putting them in a spreadsheet and calculating the tax. I know I'm missing some though, I buy too much stuff. There are even people I know who don't just evade the tax out of laziness, but evade it intentionally to save money, intentionally buying stuff online because it doesn't charge tax. My point is that this will be a very large amount of effort for people, and there will be a large amount of tax evasion due to both laziness and greed.
  - 082349872349872 6y ago
    That's more or less what an income tax is. To first order, one only needs to realise income sufficient to support consumption.
- hn_throwaway_99 6y ago
  Not hard to eliminate the regressive parts of this, just give a tax credit for the first $X dollars of consumption. It took me a while to understand consumption taxes, but now I'm fully in favor of them. The level of your standard of living is solely determined by what you spend money on, not your total wealth. Plus taxing consumption would be much easier and harder to skirt than a wealth tax.
  - coldtea 6y ago
    >Plus taxing consumption would be much easier and harder to skirt than a wealth tax. It's actually just as easy, if not more. E.g. you don't "buy" a car, your trust/company buys it, and you just happen to use it for "business purposes". Same for all your other needs. And good luck trying to tax spending abroad...
    - kiba 6y ago
      Just get rid of any "business purpose" and deductions.
      - coldtea 6y ago
        With stopping all businesses from having expenses?
  - dredmorbius 6y ago
    Now you can no longer simply tax transactions --- business points of sale are fewer in number than individual budgets, and are better instrumented for bookkeeping, auditing, and taxation --- and need somehow to track all 0ersonal consumption expenditures individually.
pydry 6y ago
That's even more regressive than taxing income, which is even more regressive than taxing wealth.
coldtea 6y ago
The ultrarich don't comsume as much of their wealth, whereas the poorer consume everything they make (aka "hand to mouth"). A 10,000,000/year consumption by a billionaire is an insignificant part of their wealth and their annual revenue, but still allows for an extravagant lifestyle. A 40,000/year consumption by a working class person make barely allow them to make end meet, and it might be everything they made in that year (and they might even owe a lot as well). So, taxing 20% on consumption, would net 2M on the billionaire (a laughable amount for them) and 8K for the working class person (which could be a matter of life or death for them, some health treatment, their kids going to college, etc.)
- el_nahual 6y ago
  Consumption can be taxed on a sliding, marginal scale, and it has no upper bound, unlike income tax which can't go above 100%
- weaksauce 6y ago
  it's staggering just how large a billion of something is... a million seconds is about a 11.5 days. a billion seconds is about 32 years. a few million dollars to a billionaire is next to nothing.
- ropable 6y ago
  So don't tax the first (e.g.) $25,000 of a person's annual income/consumption, then tax the remainder at a progressive rate.
  - coldtea 6y ago
    Even if we tax it at a progressive rate, the total consumption tax paid by the rich will be only nominally, not percentage wise, bigger than the middle class/poor, because their consumption doesn't even come close to their revenue/wealth (aside from the fact that it's also hidden behind 2000 shell companies whose assets they use for personal use).
- dahfizz 6y ago
  We need to separate the location of the tax and how progressive the tax is. They are orthogonal. Any tax can be made more progressive in implementation (high deductions, tiered rates, etc). Impact on poor vs wealthy shouldn't be a consideration when deciding what we want to tax.
el_nahual 6y ago
A characteristic of consumption taxes that is often ignored is that they can go above 100%. So a progressive consumption tax could easily be 0 for low levels of consumption and 100%+ for ultra-high ones (think, over 10MM/yr). I can't think of why we wouldn't tax consumption above 50MM say at a multiple or two of 100%. Since much of this consumption is conspicuous, it's even possible that high levels of taxation could even be geffen-like: Yes, we both have lear jets but I'm so rich and spend so much that mine cost _twice_ what yours did.
stephenhuey 6y ago
My college roommate came back from an economics class one day and giddily told me how the professor talked about awesome it would be to just tax on consumption...except that it would likely incentivize a lot more black market trading.

Generally that's considered regressive (so we all have to eat and eat about the same amount of food each day.) For jeff bezos the Tesco Extra Special range is a rounding error whereas for the bottom 10% it's a large fraction of daily income. taxing that basically taxes a large fraction of their daily income.

srtjstjsj 6y ago
Tax consumption progressively.
- Thorrez 6y ago
  How would you implement that? Isn't consumption tax generally a sales tax? At the time of a specific sale it would be hard to find out the right tax rate.
  - dahfizz 6y ago
    You could have a large personal deduction. You could tax everything at the lowest rate at the point of sale but make people do the accounting and pay their real rate if they are in a higher rate. The "tax" at the point of sale would act like income withholdings do now. You could categorize good so that yatchs have a much higher rate than groceries. You could also come up with an average price for good so that really expensive e.g. clothes and cars are taxed at a higher rate than they are for "normal" goods. All it takes is some creativity.
    - Thorrez 6y ago
      It requires people to save receipts on everything they buy. People (in states that charge sales tax) already sort of are required to do this for goods they buy online that don't charge tax. The vast vast vast majority of people (every single person I've asked) evade this tax. I try to pay the tax myself (I'm the only person I know who does this) by going through online receipts, putting them in a spreadsheet and calculating the tax. I know I'm missing some though, I buy too much stuff. There are even people I know who don't just evade the tax out of laziness, but evade it intentionally to save money, intentionally buying stuff online because it doesn't charge tax. My point is that this will be a very large amount of effort for people, and there will be a large amount of tax evasion due to both laziness and greed.
- 082349872349872 6y ago
  That's more or less what an income tax is. To first order, one only needs to realise income sufficient to support consumption.
hn_throwaway_99 6y ago
Not hard to eliminate the regressive parts of this, just give a tax credit for the first $X dollars of consumption. It took me a while to understand consumption taxes, but now I'm fully in favor of them. The level of your standard of living is solely determined by what you spend money on, not your total wealth. Plus taxing consumption would be much easier and harder to skirt than a wealth tax.
- coldtea 6y ago
  >Plus taxing consumption would be much easier and harder to skirt than a wealth tax. It's actually just as easy, if not more. E.g. you don't "buy" a car, your trust/company buys it, and you just happen to use it for "business purposes". Same for all your other needs. And good luck trying to tax spending abroad...
  - kiba 6y ago
    Just get rid of any "business purpose" and deductions.
    - coldtea 6y ago
      With stopping all businesses from having expenses?
- dredmorbius 6y ago
  Now you can no longer simply tax transactions --- business points of sale are fewer in number than individual budgets, and are better instrumented for bookkeeping, auditing, and taxation --- and need somehow to track all 0ersonal consumption expenditures individually.

pydry 6y ago

That's even more regressive than taxing income, which is even more regressive than taxing wealth.

coldtea 6y ago

The ultrarich don't comsume as much of their wealth, whereas the poorer consume everything they make (aka "hand to mouth"). A 10,000,000/year consumption by a billionaire is an insignificant part of their wealth and their annual revenue, but still allows for an extravagant lifestyle. A 40,000/year consumption by a working class person make barely allow them to make end meet, and it might be everything they made in that year (and they might even owe a lot as well). So, taxing 20% on consumption, would net 2M on the billionaire (a laughable amount for them) and 8K for the working class person (which could be a matter of life or death for them, some health treatment, their kids going to college, etc.)

el_nahual 6y ago
Consumption can be taxed on a sliding, marginal scale, and it has no upper bound, unlike income tax which can't go above 100%
weaksauce 6y ago
it's staggering just how large a billion of something is... a million seconds is about a 11.5 days. a billion seconds is about 32 years. a few million dollars to a billionaire is next to nothing.
ropable 6y ago
So don't tax the first (e.g.) $25,000 of a person's annual income/consumption, then tax the remainder at a progressive rate.
- coldtea 6y ago
  Even if we tax it at a progressive rate, the total consumption tax paid by the rich will be only nominally, not percentage wise, bigger than the middle class/poor, because their consumption doesn't even come close to their revenue/wealth (aside from the fact that it's also hidden behind 2000 shell companies whose assets they use for personal use).
dahfizz 6y ago
We need to separate the location of the tax and how progressive the tax is. They are orthogonal. Any tax can be made more progressive in implementation (high deductions, tiered rates, etc). Impact on poor vs wealthy shouldn't be a consideration when deciding what we want to tax.

el_nahual 6y ago

A characteristic of consumption taxes that is often ignored is that they can go above 100%. So a progressive consumption tax could easily be 0 for low levels of consumption and 100%+ for ultra-high ones (think, over 10MM/yr). I can't think of why we wouldn't tax consumption above 50MM say at a multiple or two of 100%. Since much of this consumption is conspicuous, it's even possible that high levels of taxation could even be geffen-like: Yes, we both have lear jets but I'm so rich and spend so much that mine cost _twice_ what yours did.

stephenhuey 6y ago

My college roommate came back from an economics class one day and giddily told me how the professor talked about awesome it would be to just tax on consumption...except that it would likely incentivize a lot more black market trading.