5 ms·

that would incredibly regressive. it's an awful idea

by vvG94KbDUtRa 6y ago

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.
        ac29 6y ago
        > And even if they didn’t spend it, any capital gains or interest income would still be taxed too. The post you are responding to is talking about getting rid of income taxes. Those are income taxes.
    - conanbatt 6y ago
      If you wanted to tax richer over poor, this is not an efficient way to do it at all. It is also a pretty distortive tax, and it creates smuggling, robbery, and disproportionally punishes those that consume those products and are also on the poorer spectrum.
- boulos 6y ago
  Even still, there is no sales tax rate that ends up charging wealthy people anything meaningful. Roughly speaking, the savings rate of wealthy people is so high (and therefore 1-that as spending rate) and everyone else basically spends all their money, such that you need exorbitant taxes on “stuff only rich people would buy”. Zucman and Saez have a decent figure for this, which this article in the Atlantic includes as a high resolution version [1] or a non paywall one at [2]. People quibble with the details here (particularly post taxes and transfers like social security), but much of the income and much of the wealth is in the top 10%. The bottom 90% basically saves nothing, and while many at the true bottom decile / quintile spend it only on the goods you would exclude, you still end up with “we can’t tax wealthier people, without being regressive” for most of the middle. For example, car payments, home sales, electronics. These are all “normal” things for most people, so unless you want to raise taxes on the bottom 50% or so (who currently do not pay much in income taxes), you have to exempt a much wider variety of goods. What does that leave you with? Yachts? Cars over a certain amount? Houses over a certain amount? It’s not impossible to figure out how to do it, but you then get to pile on import taxes (“Fine. I’ll buy my yacht in the Bahamas and sail it here rather than pay 10x in taxes”) and so on. Fundamentally, in designing a taxation system, you’re deciding how to fund the government and redistribute wealth. It turns out that spending, even of non basic goods, isn’t a good proxy of what an individual can afford to contribute without noticing. Income isn’t perfect, but spending is actually pretty bad. 1] https://www.google.com/amp/s/amp.theatlantic.com/amp/article/382306/ https://www.google.com/amp/s/amp.theatlantic.com/amp/article... [2] https://www.financialsamurai.com/the-average-savings-rates-by-income-wealth-class/ https://www.financialsamurai.com/the-average-savings-rates-b...
  - refurb 6y ago
    This is not very convincing. Top 1% save 40%, so they spend 60%. In order for a consumption tax to work, it would need to be in the 30-40% range. So you'd be capturing 60%*35% = 21% of income. Currently incomes tax is 27% of income for the top 1% in the US. Add on top capital gains and you're collecting the same or more than you are now.
    - boulos 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.
      - ac29 6y ago
        > And even if they didn’t spend it, any capital gains or interest income would still be taxed too. The post you are responding to is talking about getting rid of income taxes. Those are income taxes.
  - conanbatt 6y ago
    If you wanted to tax richer over poor, this is not an efficient way to do it at all. It is also a pretty distortive tax, and it creates smuggling, robbery, and disproportionally punishes those that consume those products and are also on the poorer spectrum.
boulos 6y ago
Even still, there is no sales tax rate that ends up charging wealthy people anything meaningful. Roughly speaking, the savings rate of wealthy people is so high (and therefore 1-that as spending rate) and everyone else basically spends all their money, such that you need exorbitant taxes on “stuff only rich people would buy”. Zucman and Saez have a decent figure for this, which this article in the Atlantic includes as a high resolution version [1] or a non paywall one at [2]. People quibble with the details here (particularly post taxes and transfers like social security), but much of the income and much of the wealth is in the top 10%. The bottom 90% basically saves nothing, and while many at the true bottom decile / quintile spend it only on the goods you would exclude, you still end up with “we can’t tax wealthier people, without being regressive” for most of the middle. For example, car payments, home sales, electronics. These are all “normal” things for most people, so unless you want to raise taxes on the bottom 50% or so (who currently do not pay much in income taxes), you have to exempt a much wider variety of goods. What does that leave you with? Yachts? Cars over a certain amount? Houses over a certain amount? It’s not impossible to figure out how to do it, but you then get to pile on import taxes (“Fine. I’ll buy my yacht in the Bahamas and sail it here rather than pay 10x in taxes”) and so on. Fundamentally, in designing a taxation system, you’re deciding how to fund the government and redistribute wealth. It turns out that spending, even of non basic goods, isn’t a good proxy of what an individual can afford to contribute without noticing. Income isn’t perfect, but spending is actually pretty bad. 1] https://www.google.com/amp/s/amp.theatlantic.com/amp/article/382306/ https://www.google.com/amp/s/amp.theatlantic.com/amp/article... [2] https://www.financialsamurai.com/the-average-savings-rates-by-income-wealth-class/ https://www.financialsamurai.com/the-average-savings-rates-b...
- refurb 6y ago
  This is not very convincing. Top 1% save 40%, so they spend 60%. In order for a consumption tax to work, it would need to be in the 30-40% range. So you'd be capturing 60%*35% = 21% of income. Currently incomes tax is 27% of income for the top 1% in the US. Add on top capital gains and you're collecting the same or more than you are now.
  - boulos 6y ago