4 ms·

I think this is fundamentally a regressive idea. Currently the very poor pay zero (or effectively zero) income taxes. No matter how you structure the sales tax,

by Others 6y ago

I think this is fundamentally a regressive idea. Currently the very poor pay zero (or effectively zero) income taxes. No matter how you structure the sales tax, you cannot go below zero. (I think negative sales tax is not actually realistic, nor particularly progressive.) A system that only taxes spending fundamentally has problems in that the richer people can afford to save and invest.

null0pointer 6y ago
Could you explain a bit more how negative sales tax is unrealistic? We already subsidize things we want to encourage. > A system that only taxes spending fundamentally has problems in that the richer people can afford to save and invest. That is an existing problem inherent to any tax system. It's just saying "Rich people can afford to not spend all of their money". I don't see how that's fundamental to taxing only spending.
- singron 6y ago
  One problem is that it encourages using items with negative sales tax for other purposes with value lower than the true cost (i.e. it can induce inefficient demand). There are similar issues in agriculture subsidies and price regulation. E.g. High fructose corn syrup is probably as popular as it is because corn has been subsidized and cane sugar has a regulated (high) price. It's kind of like an inefficient arbitrage between physical goods to avoid taxes.
- pydry 6y ago
  >That is an existing problem inherent to any tax system. It's just saying "Rich people can afford to not spend all of their money". I don't see how that's fundamental to taxing only spending. If you taxed only assets it wouldn't be a problem. Mo money mo taxes. Whether you want to tax predominantly assets or spending usually reflects which side of the capital divide you see yourself identifying with - predominantly a recipient of unearned income (e.g. landlord/FIRE) or a payer (e.g. renter).
- FabHK 6y ago
  > more how negative sales tax is unrealistic In this proposal, sales tax is the only tax. You can't run a government without money.
- curryst 6y ago
  > Could you explain a bit more how negative sales tax is unrealistic? We already subsidize things we want to encourage. Lets say apples have a -5% tax rate, and cost $1. Every time I buy an apple from the store, I pay $0.95 (the government pays the rest, which is a problem in and of itself). I can sell that apple for $1, and the government basically just paid me $0.05 for selling an apple. The problem with the government paying that $0.05 is that sales tax is assessed at time of purchase, but the government isn't there to pay their part. The grocery store basically has an IOU from the government. 5% may be higher than the grocery store's margins, which means the customer payment is actually less than the good is worth, so the grocery store's ledger actually goes down for that sale until the government pays back their part. And then you have to deal with fraud. Nobody wants to overreport their sales tax, it costs them money. If you can make money off sales tax, people will filing fraudulent tax reports, and I really don't want the IRS having to track how many apples the grocery store actually sold. I'm sure money launderers would also find a way to use it to buffer their costs. Subsidies probably still have fraud, but it's a smaller number of entities to work with. We can also budget for it because we determine the amount. I can give a budget to the subsidy, but I can't tell people to only buy 10,000 apples next year.
  - ganafagol 6y ago
    An instance of that fraud is that re-selling would generate money. I buy that apple for 95ct. Sell it to the next supermarket for 98ct. They sell it to a customer for 100ct of which the customer pays 95ct. Goes to the next supermarket etc etc. Today you'd just accumulate more and more tax so nobody does that. With negative VAT this loop is now generating money.
jessaustin 6y ago
It could be coupled with a hefty UBI. No need for means-testing. If everyone got e.g. $10,000/yr, that would completely offset VAT for people who don't buy much. People who spend millions every year wouldn't even notice it.
- root_axis 6y ago
  I'm not opposed to the idea of UBI, but it doesn't really solve any problems here, it just adds massive political and logistical complexity that would essentially doom any possibility of reforming the tax code.
  - jessaustin 6y ago
    In this thread, we're discussing how to ameliorate the regressive aspects of sales taxes. Poor people spend most of what they have, so they are subject to proportionally more sales taxes than rich people who spend very little of their vast accumulated wealth on goods subject to those taxes. The initial, flawed response to this issue would be to construct some "massive political and logistical complexity" in order to track everyone's income and spending and family situation and lots of other stuff too and calculate their VAT refunds based on some formula. The much simpler solution is to just give everyone the same amount of money. Poor people will spend some portion of it on sales taxes, and they'll use the rest for other purposes of their choosing. Slightly richer people will spend all of the UBI on sales taxes but will come out even. Slightly richer people will be able to offset some portion of their sales taxes. Really rich people won't even notice they got a UBI. Perhaps you really meant that "massive political and logistical complexity" is required to get anything through the legislative process? After all, the more complicated it gets, the more places lobbyists can hide loot for their employers.
    - harrierpigeon 6y ago
      One of the things that worries me with UBI is that the somewhat-better-off people without a moral compass- for instance, slumlords- will raise rent and eat really far into other people's UBI because they know everyone gets it and needs a place to live, thus keeping them from being able to save up to afford even a modest "starter home". Like GPU scalpers, they provide very little value and charge a lot for their services. There's a small group of people in my town that really do the poor in via rent already without so much as a care about the quality of housing they provide, and I fear that one of the unintended effects of UBI is that the slumlord class will get a ton more money without doing anything to improve other people's lives. TL;DR: my fear with UBI is that unscrupulous people will do unfair things like significantly raise rent to eat into other people's free money thus leaving the poor in the same spot, more or less.
ktapcnbje 6y ago
Fair tax, a proposal for replacing current taxes with a federal sales tax, has already come up with a solution for this. Under its plan every person receives a check to cover the sales tax on spending up to the poverty level.
- ganafagol 6y ago
  How do those plans tackle the problem of heterogenious tax systems internationally? No tourist is going to visit you if the restaurant visit costs 3x as much as in their home country (assuming similar living standards in both countries). Those tourists would effectively be taxed twice. Income tax at home and then again full charge on the steak on vacation.
  - ktapcnbje 6y ago
    The proposed sale tax rate(23%) would not differ too much from that VAT rate that Europeans already are used to paying.

by Others 6y ago

null0pointer 6y ago

Could you explain a bit more how negative sales tax is unrealistic? We already subsidize things we want to encourage. > A system that only taxes spending fundamentally has problems in that the richer people can afford to save and invest. That is an existing problem inherent to any tax system. It's just saying "Rich people can afford to not spend all of their money". I don't see how that's fundamental to taxing only spending.

singron 6y ago
One problem is that it encourages using items with negative sales tax for other purposes with value lower than the true cost (i.e. it can induce inefficient demand). There are similar issues in agriculture subsidies and price regulation. E.g. High fructose corn syrup is probably as popular as it is because corn has been subsidized and cane sugar has a regulated (high) price. It's kind of like an inefficient arbitrage between physical goods to avoid taxes.
pydry 6y ago
>That is an existing problem inherent to any tax system. It's just saying "Rich people can afford to not spend all of their money". I don't see how that's fundamental to taxing only spending. If you taxed only assets it wouldn't be a problem. Mo money mo taxes. Whether you want to tax predominantly assets or spending usually reflects which side of the capital divide you see yourself identifying with - predominantly a recipient of unearned income (e.g. landlord/FIRE) or a payer (e.g. renter).
FabHK 6y ago
> more how negative sales tax is unrealistic In this proposal, sales tax is the only tax. You can't run a government without money.
curryst 6y ago
> Could you explain a bit more how negative sales tax is unrealistic? We already subsidize things we want to encourage. Lets say apples have a -5% tax rate, and cost $1. Every time I buy an apple from the store, I pay $0.95 (the government pays the rest, which is a problem in and of itself). I can sell that apple for $1, and the government basically just paid me $0.05 for selling an apple. The problem with the government paying that $0.05 is that sales tax is assessed at time of purchase, but the government isn't there to pay their part. The grocery store basically has an IOU from the government. 5% may be higher than the grocery store's margins, which means the customer payment is actually less than the good is worth, so the grocery store's ledger actually goes down for that sale until the government pays back their part. And then you have to deal with fraud. Nobody wants to overreport their sales tax, it costs them money. If you can make money off sales tax, people will filing fraudulent tax reports, and I really don't want the IRS having to track how many apples the grocery store actually sold. I'm sure money launderers would also find a way to use it to buffer their costs. Subsidies probably still have fraud, but it's a smaller number of entities to work with. We can also budget for it because we determine the amount. I can give a budget to the subsidy, but I can't tell people to only buy 10,000 apples next year.
- ganafagol 6y ago
  An instance of that fraud is that re-selling would generate money. I buy that apple for 95ct. Sell it to the next supermarket for 98ct. They sell it to a customer for 100ct of which the customer pays 95ct. Goes to the next supermarket etc etc. Today you'd just accumulate more and more tax so nobody does that. With negative VAT this loop is now generating money.

jessaustin 6y ago

It could be coupled with a hefty UBI. No need for means-testing. If everyone got e.g. $10,000/yr, that would completely offset VAT for people who don't buy much. People who spend millions every year wouldn't even notice it.

root_axis 6y ago
I'm not opposed to the idea of UBI, but it doesn't really solve any problems here, it just adds massive political and logistical complexity that would essentially doom any possibility of reforming the tax code.
- jessaustin 6y ago
  In this thread, we're discussing how to ameliorate the regressive aspects of sales taxes. Poor people spend most of what they have, so they are subject to proportionally more sales taxes than rich people who spend very little of their vast accumulated wealth on goods subject to those taxes. The initial, flawed response to this issue would be to construct some "massive political and logistical complexity" in order to track everyone's income and spending and family situation and lots of other stuff too and calculate their VAT refunds based on some formula. The much simpler solution is to just give everyone the same amount of money. Poor people will spend some portion of it on sales taxes, and they'll use the rest for other purposes of their choosing. Slightly richer people will spend all of the UBI on sales taxes but will come out even. Slightly richer people will be able to offset some portion of their sales taxes. Really rich people won't even notice they got a UBI. Perhaps you really meant that "massive political and logistical complexity" is required to get anything through the legislative process? After all, the more complicated it gets, the more places lobbyists can hide loot for their employers.
  - harrierpigeon 6y ago
    One of the things that worries me with UBI is that the somewhat-better-off people without a moral compass- for instance, slumlords- will raise rent and eat really far into other people's UBI because they know everyone gets it and needs a place to live, thus keeping them from being able to save up to afford even a modest "starter home". Like GPU scalpers, they provide very little value and charge a lot for their services. There's a small group of people in my town that really do the poor in via rent already without so much as a care about the quality of housing they provide, and I fear that one of the unintended effects of UBI is that the slumlord class will get a ton more money without doing anything to improve other people's lives. TL;DR: my fear with UBI is that unscrupulous people will do unfair things like significantly raise rent to eat into other people's free money thus leaving the poor in the same spot, more or less.

ktapcnbje 6y ago

Fair tax, a proposal for replacing current taxes with a federal sales tax, has already come up with a solution for this. Under its plan every person receives a check to cover the sales tax on spending up to the poverty level.

ganafagol 6y ago
How do those plans tackle the problem of heterogenious tax systems internationally? No tourist is going to visit you if the restaurant visit costs 3x as much as in their home country (assuming similar living standards in both countries). Those tourists would effectively be taxed twice. Income tax at home and then again full charge on the steak on vacation.
- ktapcnbje 6y ago
  The proposed sale tax rate(23%) would not differ too much from that VAT rate that Europeans already are used to paying.