5 ms·

How much of this mess would go away if we didn't have income tax and increased sales tax?

sdenton4 6y ago
My foot was hurting, so I cut it off and now just walk on my hands. Which is to say, that's a terribly obtuse way to deal with the problem, and does nothing to keep this kind of abuse from surfacing in other domains.
- vyrotek 6y ago
  The idea here is to shift the work to more streamlined systems already ran by businesses instead of relying on individual citizens to figure this all out. Citizens are not equipped with the time and money to deal with these abuses. Large private businesses who are already optimizing these expenses might keep things in check. It's not a unique idea. In fact, I first heard it from IRS employees themselves.
  - conanbatt 6y ago
    There is no reason for pushing tax accounting into businesses to be better than for it to be on the citizens. It does not make it a better tax, it does not make necesarily make it cheaper to manage, and it has the gravest of dangers of misaligning the incentives between the net tax payer and the net tax consumer.
    - imtringued 6y ago
      Here is a simple example. You buy 10 stocks from Robinhood for $50. You sell them for $75. You now have to pay taxes on this. The broker can just inform the government of this taxable event and thus automatically deduct the tax for you. One argument in favor of filing taxes yourself is that you can transfer the stocks to a different broker. No single broker knows what you have been doing with your stocks. However, the government already exists as a central entity and it can simply receive a full record of all taxable events from all brokers. Where do you see this misaligning the incentives between the net tax payer and the net tax consumer? If anything, it would make cryptocurrency based credit cards viable as a means of payment because the taxation problem is no longer intractable for the individual tax payer.
      - conanbatt 6y ago
        You buy a bottle of wine at 10bucks with your income that pays 10%, meaning that it cost you 11 bucks. Know you know you paid taxes and got your fine bottle. You switch it to the store. Now the store charges you 11 dollars for the bottle of wine. It looks like you paid no taxes, but you did. Now you dont know your tax rate, you dont see it, and they can be raised without your approval as it is hidden from you. VAT taxes work like that and have reached sometimes 30%+. Furthermore, it doesnt make taxes simpler, the business still has to do tax handling for you, which means you also pay that company accountant.
  - sdenton4 6y ago
    It's attacking the wrong problems, and will have the same set of problems if it succeeds. The actual root problem here is Grover Norquist + friends (comprising a large part of the republican party), who are opposed to all taxes, under basically all circumstances. Norquist is on record saying that it's GOOD that taxes are overly complicated, because it makes people dislike them more, and trust government less. There's an obvious marriage of convenience between the anti-taxxers and TurboTax, which is why TurboTax is able to hold the whole American tax infrastructure in stasis with seemingly miniscule amounts of contributions. https://en.wikipedia.org/wiki/Grover_Norquist https://en.wikipedia.org/wiki/Grover_Norquist https://www.npr.org/sections/money/2019/04/03/709656642/episode-760-tax-hero https://www.npr.org/sections/money/2019/04/03/709656642/epis... Remember, loads of other countries do this easily. Income is easy to track on the government side: they have all of the employment information, and can fill in the blanks easily. Tax day should really just be a chance for you to double check the calculation. It's a political problem, not a technical problem. (Also, what the others have said about regressive taxes is 100% correct.)
- vishnugupta 6y ago
  Could you please describe why is that a bad idea? Or point me to a good reading source? I’m learning different aspects of economics and am genuinely interested to understand the downsides of taxing consumption as opposed to earnings. Now that I think about it, in India we are taxed on both ends.
  - astura 6y ago
    Sales tax is regressive (lowest earners pay the most as % of their income, highest earners pay the least as % of their income) whereas income tax is [usually] progressive (lowest earners pay the least, highest earners pay the most)
vvG94KbDUtRa 6y ago
that would incredibly regressive. it's an awful idea
- MetaWhirledPeas 6y ago
  Why?
- refurb 6y ago
  Most sales taxes exempt essentials like basic groceries, clothing, toiletries. It’s actually a great idea.
  - conanbatt 6y ago
    If you wanted to make a progressive tax, certainly income is way better than the proxy of what poor people or rich people consume differently. In any case in practice this is obviously not done, as cigarettes, alcohol, food, basic online purchases etc have sale taxes.
    - refurb 6y ago
      Rich people consume more than the poor. Even if you have illegal income it gets captured by consumption taxes. And yes it is done. Food, clothes, toiletries aren’t tax in most states in the US or Canada. Of course alcohol and tobacco aren’t exempted. You’re trying to discourage use not encourage it.
      - PeterisP 6y ago
        While technically rich people consume more than the poor in absolute numbers, they consume a smaller percentage of their income than the poor, so a consumption tax is inherently regressive, taxing rich people less.
        refurb 6y ago
        Source? If you exempt the necessities of living (food, etc) I’d suggest the rich would be tax on a far bigger percentage of income than the poor. And even if they didn’t spend it, any capital gains or interest income would still be taxed too. And you’re ignoring the fact that a consumption tax would capture spending from black market income as well. Expanding the pool of income taxes.

My foot was hurting, so I cut it off and now just walk on my hands. Which is to say, that's a terribly obtuse way to deal with the problem, and does nothing to keep this kind of abuse from surfacing in other domains.

vyrotek 6y ago
The idea here is to shift the work to more streamlined systems already ran by businesses instead of relying on individual citizens to figure this all out. Citizens are not equipped with the time and money to deal with these abuses. Large private businesses who are already optimizing these expenses might keep things in check. It's not a unique idea. In fact, I first heard it from IRS employees themselves.
- conanbatt 6y ago
  There is no reason for pushing tax accounting into businesses to be better than for it to be on the citizens. It does not make it a better tax, it does not make necesarily make it cheaper to manage, and it has the gravest of dangers of misaligning the incentives between the net tax payer and the net tax consumer.
  - imtringued 6y ago
    Here is a simple example. You buy 10 stocks from Robinhood for $50. You sell them for $75. You now have to pay taxes on this. The broker can just inform the government of this taxable event and thus automatically deduct the tax for you. One argument in favor of filing taxes yourself is that you can transfer the stocks to a different broker. No single broker knows what you have been doing with your stocks. However, the government already exists as a central entity and it can simply receive a full record of all taxable events from all brokers. Where do you see this misaligning the incentives between the net tax payer and the net tax consumer? If anything, it would make cryptocurrency based credit cards viable as a means of payment because the taxation problem is no longer intractable for the individual tax payer.
    - conanbatt 6y ago
      You buy a bottle of wine at 10bucks with your income that pays 10%, meaning that it cost you 11 bucks. Know you know you paid taxes and got your fine bottle. You switch it to the store. Now the store charges you 11 dollars for the bottle of wine. It looks like you paid no taxes, but you did. Now you dont know your tax rate, you dont see it, and they can be raised without your approval as it is hidden from you. VAT taxes work like that and have reached sometimes 30%+. Furthermore, it doesnt make taxes simpler, the business still has to do tax handling for you, which means you also pay that company accountant.
- sdenton4 6y ago
  It's attacking the wrong problems, and will have the same set of problems if it succeeds. The actual root problem here is Grover Norquist + friends (comprising a large part of the republican party), who are opposed to all taxes, under basically all circumstances. Norquist is on record saying that it's GOOD that taxes are overly complicated, because it makes people dislike them more, and trust government less. There's an obvious marriage of convenience between the anti-taxxers and TurboTax, which is why TurboTax is able to hold the whole American tax infrastructure in stasis with seemingly miniscule amounts of contributions. https://en.wikipedia.org/wiki/Grover_Norquist https://en.wikipedia.org/wiki/Grover_Norquist https://www.npr.org/sections/money/2019/04/03/709656642/episode-760-tax-hero https://www.npr.org/sections/money/2019/04/03/709656642/epis... Remember, loads of other countries do this easily. Income is easy to track on the government side: they have all of the employment information, and can fill in the blanks easily. Tax day should really just be a chance for you to double check the calculation. It's a political problem, not a technical problem. (Also, what the others have said about regressive taxes is 100% correct.)
vishnugupta 6y ago
Could you please describe why is that a bad idea? Or point me to a good reading source? I’m learning different aspects of economics and am genuinely interested to understand the downsides of taxing consumption as opposed to earnings. Now that I think about it, in India we are taxed on both ends.
- astura 6y ago
  Sales tax is regressive (lowest earners pay the most as % of their income, highest earners pay the least as % of their income) whereas income tax is [usually] progressive (lowest earners pay the least, highest earners pay the most)

vvG94KbDUtRa 6y ago

that would incredibly regressive. it's an awful idea

MetaWhirledPeas 6y ago
Why?
refurb 6y ago
Most sales taxes exempt essentials like basic groceries, clothing, toiletries. It’s actually a great idea.
- conanbatt 6y ago
  If you wanted to make a progressive tax, certainly income is way better than the proxy of what poor people or rich people consume differently. In any case in practice this is obviously not done, as cigarettes, alcohol, food, basic online purchases etc have sale taxes.
  - refurb 6y ago
    Rich people consume more than the poor. Even if you have illegal income it gets captured by consumption taxes. And yes it is done. Food, clothes, toiletries aren’t tax in most states in the US or Canada. Of course alcohol and tobacco aren’t exempted. You’re trying to discourage use not encourage it.
    - PeterisP 6y ago
      While technically rich people consume more than the poor in absolute numbers, they consume a smaller percentage of their income than the poor, so a consumption tax is inherently regressive, taxing rich people less.
      - refurb 6y ago
        Source? If you exempt the necessities of living (food, etc) I’d suggest the rich would be tax on a far bigger percentage of income than the poor. And even if they didn’t spend it, any capital gains or interest income would still be taxed too. And you’re ignoring the fact that a consumption tax would capture spending from black market income as well. Expanding the pool of income taxes.