4 ms·

Sales taxes aren't a particularly balanced way of taxation. Someone living paycheck to paycheck essentially spends all of their income, which means that they p

Sales taxes aren't a particularly balanced way of taxation. Someone living paycheck to paycheck essentially spends all of their income, which means that they pay the full amount of sales tax possible for someone with that income. Compared to someone saving or investing who doesn't pay as much tax as they could. A little simplified because sales taxes typically don't apply to things like rent, but the point still stands. The best way to tax the "rich" is normally a wealth tax – taxing the retained wealth rather than income or outgoings (sales tax). This could be a direct wealth tax, a property tax, inheritance tax, all sorts of options but they all have similar effects, outsized on the rich, small on the poor.

cameronh90 6y ago
Sales taxes aren't the most balanced, but they are very easy to enforce and don't distort the economy very much. Standard wealth taxes are easy to avoid and have weird effects - but land value tax would probably be great. Unfortunately, people tend to vote against it.
- sam_lowry_ 6y ago
  VAT is much easier to enforce than sales taxes, and as much as I dislike VAT, one can use it to enforce sustainable living and environmental policies. Think of 66% VAT applied to all products. Suddenly, repairing and extending lifetime of existing stuff becomes economically viable.
  - kgwgk 6y ago
    You would pay 66% VAT on repairs as well.
    - sam_lowry_ 6y ago
      Only on the added value, e.g. a new smartphone glass. Work will be relatively cheaper. One of the most reasonable proposals for UBI is to finance it through VAT. Some 15 years ago there was a party in Belgium that lobbied for UBI and they calculated that VAT should increase from 21% to 33% to finance UBI.
      - kgwgk 6y ago
        The work is added value. That is how VAT works. Edit: I guess that if you're paying a salary to someone in your household staff who can repare the smartphone you only need to buy (and pay VAT on) the replacement glass. But I don't think this is what you meant. I think that you just don't understand how VAT works. If you bring your phone to a repair shop in Belgium the 21% VAT will be applied on the whole bill, parts and labour.
        sam_lowry_ 6y ago
        https://lmgtfy.app/?q=Why+is+there+no+VAT+on+salary%3F https://lmgtfy.app/?q=Why+is+there+no+VAT+on+salary%3F
        sam_lowry_ 6y ago
        For the proverbial repair shop, supplies cost 50€ and the repair costs 100€. 50€ is left to the repair shop. In a country with 21% VAT, the supplier will be paid 60,50€, and the end client will have to pay 121€ for the repair. The repair shop now owes 21 - 10,50 = 10,50€ in VAT to the tax authorities. But the repair shop still has 50€! Assuming we are in Belgium and all of the benefit is used to pay the salary, we will deduce 22% social security tax, then the repairer will have to pay his 50% income tax, so at the end the repairer receives around 20€ in net pay. I am simplifying to the extreme in the hope that you get the idea. You may be tempted to say that the end client paid 121€ from his salary, and 21€ is actually the tax. But this is the whole point! He will be more likely to pay 21€ VAT on the repair rather than 120€ VAT on a new iPhone. And repair shops there will be.
        kgwgk 6y ago
        I have no idea what are you trying to show. If a) the customer pays 100+tax for the repair (which includes in this very simplified model 50+tax for the supplies and 50+tax for the value added by the repair shop) and b) the tax goes from 21% to 66% then c) the customer will pay 166 for the repair instead of 121. That's what I said in https://news.ycombinator.com/item?id=26967392 https://news.ycombinator.com/item?id=26967392 I don't see how "work will be relatively cheaper". The VAT applies to everything. (It's also confusing that you say that the benefit is used to pay the salaries, by the way. And if what you call "benefit" is used entirely to pay the salary then no corporate tax will be paid because the company will be losing money.)
  - yellowapple 6y ago
    > Think of 66% VAT applied to all products. That's 66% more on a massive chunk of lower and middle class spending. I can think of few things more hostile to the working class than some regressive tax like VAT.
  - danpalmer 6y ago
    So the lowest income people who can't afford to buy the more repairable or higher quality items have to keep re-buying at a 66% markup, while those with more money can buy higher quality. This exacerbates the already existing "poor tax".
- danpalmer 6y ago
  Agreed that land value tax is likely a good option. I think sales taxes are also easy to get around. At least in the UK, businesses don't pay VAT, and many large purchases are made by companies. Happens in all sorts of ways, but even things like people who do a little bit of contracting work buying expensive laptops with their "business" and bypassing 20% tax. Technically ok, but often not in the spirit of the law when they're buying almost exclusively for personal use.
  - sam_lowry_ 6y ago
    This VAT avoidance on laptop purchases is a drop in the sea, that's why none cares. VAT on a new construction or even a car purchase is much harder to avoid.
    - danpalmer 6y ago
      But VAT on buying a yacht or taxes on properties are easier to avoid. Also the avoidance on things like laptops might be small, but they typically can't be done by the people at the bottom end of the income spectrum.
- lhoff 6y ago
  They are only easy to enforce because we have a huge bureaucratic apparatus in place. Imagine all the work that goes into correctly registering all the sales and spending in companies as well as the other side that checks these reports. Sales taxes are among the most inefficient taxes in existence. I am in favor of higher taxes but taxes should be evaluated based on there influence on the market and there efficiency. Sales tax scores poor in both categories. Im a fan of the MMT since they propose another thinking about taxes.
  - donw 6y ago
    Taiwan does an excellent job of enforcing sales taxes with almost no enforcement cost: https://abovethelaw.com/2019/10/in-some-countries-your-receipt-can-be-a-winning-lottery-ticket-and-can-help-the-government-collect-sales-tax/ https://abovethelaw.com/2019/10/in-some-countries-your-recei...
  - austincheney 6y ago
    I am not sure how sales taxes are less efficient than manually audited income taxes with itemized deductions. Sales taxes are largely automated.
- throwawayzRUU6f 6y ago
  Wealth tax, implemented properly without obvious loopholes (1) would be incredibly popular, as long as it shifts taxation from income to wealth. However, wealth taxes are unpopular when they're introduced as an additional tax burden. It's a bit similar to how the car industry introduced gimped, ugly, overpriced electric vehicles to "prove" the public doesn't want them. The same principle - badly thought out wealth taxes in return for nothing - just to prove the public dislikes them. Malicious compliance on political level. Nothing unites mainstream political parties as much as the dislike for taxing wealth. (1) proposals like radical markets wealth tax create an uncheatable system
  - austincheney 6y ago
    What exactly is a wealth tax, as in what asset is taxed? Is that an estate tax?
- yellowapple 6y ago
  > but land value tax would probably be great. Unfortunately, people tend to vote against it. Which is a shame, since it's about as ideal of a tax as you can get: - You can't move land to an offshore account - LVT penalizes land speculation, which is one of the main drivers of suburban sprawl and rising housing costs - It targets the rich, and marginally (if at all) impacts the lower and middle classes (replacing all taxes with LVT would almost certainly reduce middle class tax burdens and entirely eliminate lower class tax burdens) - All economic activities ultimately depend on land in some way, so instead of taxing (and thus suppressing) those economic activities, it's ultimately more economically efficient to tax land itself - The aforementioned economic activities can't readily price LVT into their own prices for goods and services, specifically because land value itself is a function of the goods and services that land enables, and because if those goods and services could actually fetch a higher price without reducing profitability (per supply v. demand), then they would almost certainly already be priced accordingly, regardless of LVT And this is just from physical land in the commonly-understood sense (i.e. some chunk of the surface area of the oblate spheroid we call Earth). There are myriad other sorts of things with the same characteristics as land; everything from geostationary orbits to intellectual property to radio spectra to IP addresses (and just about anything else with an inelastic supply) represents economic rent waiting to be collected.
  - AnimalMuppet 6y ago
    > - It targets the rich, and marginally (if at all) impacts the lower and middle classes (replacing all taxes with LVT would almost certainly reduce middle class tax burdens and entirely eliminate lower class tax burdens) The lower class still live somewhere. If you go to a land tax, their landlord isn't going to just eat that. It will be passed on to the renters. - All economic activities ultimately depend on land in some way, so instead of taxing (and thus suppressing) those economic activities, it's ultimately more economically efficient to tax land itself Here's a software-only startup that works fully remote. How does that economic activity depend on land? It doesn't, except for the workers' living places. But they'd still have living places even if they were unemployed. But I kind of agree with your last paragraph. If you are going to go with a "land use" tax, well, Google owns some buildings with servers in them, but the most valuable thing they own is google.com.
austincheney 6y ago
Everybody makes purchases. Including the wealthy charities and endowments specified in the article. Get them all in a way they cannot hide. This is the most fair approach. The moment you invent a bunch of nonsense special cases to target the rich is where they can use special cases to hide. If you want to talk about how sales taxes disadvantage the poor what are some examples? School supplies, clothes, and backpacks? These are all generally low cost items. I am aware of how that works financially having once been poor myself.
- CorrectHorseBat 6y ago
  They are low cost items, but poor people also have less money to spend so that cancels out. Here's an example: Sales tax of 10%, poor person has an income of $1000 per month and spends it all. 10%/$100 of income goes to tax. Rich person has an income of $10000 per month. They spends $5000 and save $5000. 5%/$500 of income goes to tax. That's like a reverse progressive income, arguably very disadvantageous for the poor.
  - austincheney 6y ago
    I already mentioned I have once been poor myself and know how this works. Your simplified arithmetic is not a comprehensive financial scenario. When I was poor we were dependent upon hand-me downs and school assistance programs to cover many of the essentials.
    - CorrectHorseBat 6y ago
      How does that change anything? You're just moving the burden to the nearly-poor who can't rely on those things. edit: don't forget that for your scheme to work we would need to increase sale tax. Unless you had zero income when being poor it would still negatively effect you.
  - Turing_Machine 6y ago
    There are ways around this. You could minimize the accounting by setting a rebate level, then issuing a check to everyone (yes, even the rich people) for that amount. To use your numbers, if you issued a rebate check for $100/month to everyone, the poor person would pay an effective rate of zero, while the rich person would still pay an effective rate of $400/month.

cameronh90 6y ago

Sales taxes aren't the most balanced, but they are very easy to enforce and don't distort the economy very much. Standard wealth taxes are easy to avoid and have weird effects - but land value tax would probably be great. Unfortunately, people tend to vote against it.

sam_lowry_ 6y ago
VAT is much easier to enforce than sales taxes, and as much as I dislike VAT, one can use it to enforce sustainable living and environmental policies. Think of 66% VAT applied to all products. Suddenly, repairing and extending lifetime of existing stuff becomes economically viable.
- kgwgk 6y ago
  You would pay 66% VAT on repairs as well.
  - sam_lowry_ 6y ago
    Only on the added value, e.g. a new smartphone glass. Work will be relatively cheaper. One of the most reasonable proposals for UBI is to finance it through VAT. Some 15 years ago there was a party in Belgium that lobbied for UBI and they calculated that VAT should increase from 21% to 33% to finance UBI.
    - kgwgk 6y ago
      The work is added value. That is how VAT works. Edit: I guess that if you're paying a salary to someone in your household staff who can repare the smartphone you only need to buy (and pay VAT on) the replacement glass. But I don't think this is what you meant. I think that you just don't understand how VAT works. If you bring your phone to a repair shop in Belgium the 21% VAT will be applied on the whole bill, parts and labour.
      - sam_lowry_ 6y ago
        https://lmgtfy.app/?q=Why+is+there+no+VAT+on+salary%3F https://lmgtfy.app/?q=Why+is+there+no+VAT+on+salary%3F
      - sam_lowry_ 6y ago
        For the proverbial repair shop, supplies cost 50€ and the repair costs 100€. 50€ is left to the repair shop. In a country with 21% VAT, the supplier will be paid 60,50€, and the end client will have to pay 121€ for the repair. The repair shop now owes 21 - 10,50 = 10,50€ in VAT to the tax authorities. But the repair shop still has 50€! Assuming we are in Belgium and all of the benefit is used to pay the salary, we will deduce 22% social security tax, then the repairer will have to pay his 50% income tax, so at the end the repairer receives around 20€ in net pay. I am simplifying to the extreme in the hope that you get the idea. You may be tempted to say that the end client paid 121€ from his salary, and 21€ is actually the tax. But this is the whole point! He will be more likely to pay 21€ VAT on the repair rather than 120€ VAT on a new iPhone. And repair shops there will be.
        kgwgk 6y ago
        I have no idea what are you trying to show. If a) the customer pays 100+tax for the repair (which includes in this very simplified model 50+tax for the supplies and 50+tax for the value added by the repair shop) and b) the tax goes from 21% to 66% then c) the customer will pay 166 for the repair instead of 121. That's what I said in https://news.ycombinator.com/item?id=26967392 https://news.ycombinator.com/item?id=26967392 I don't see how "work will be relatively cheaper". The VAT applies to everything. (It's also confusing that you say that the benefit is used to pay the salaries, by the way. And if what you call "benefit" is used entirely to pay the salary then no corporate tax will be paid because the company will be losing money.)
- yellowapple 6y ago
  > Think of 66% VAT applied to all products. That's 66% more on a massive chunk of lower and middle class spending. I can think of few things more hostile to the working class than some regressive tax like VAT.
- danpalmer 6y ago
  So the lowest income people who can't afford to buy the more repairable or higher quality items have to keep re-buying at a 66% markup, while those with more money can buy higher quality. This exacerbates the already existing "poor tax".
danpalmer 6y ago
Agreed that land value tax is likely a good option. I think sales taxes are also easy to get around. At least in the UK, businesses don't pay VAT, and many large purchases are made by companies. Happens in all sorts of ways, but even things like people who do a little bit of contracting work buying expensive laptops with their "business" and bypassing 20% tax. Technically ok, but often not in the spirit of the law when they're buying almost exclusively for personal use.
- sam_lowry_ 6y ago
  This VAT avoidance on laptop purchases is a drop in the sea, that's why none cares. VAT on a new construction or even a car purchase is much harder to avoid.
  - danpalmer 6y ago
    But VAT on buying a yacht or taxes on properties are easier to avoid. Also the avoidance on things like laptops might be small, but they typically can't be done by the people at the bottom end of the income spectrum.
lhoff 6y ago
They are only easy to enforce because we have a huge bureaucratic apparatus in place. Imagine all the work that goes into correctly registering all the sales and spending in companies as well as the other side that checks these reports. Sales taxes are among the most inefficient taxes in existence. I am in favor of higher taxes but taxes should be evaluated based on there influence on the market and there efficiency. Sales tax scores poor in both categories. Im a fan of the MMT since they propose another thinking about taxes.
- donw 6y ago
  Taiwan does an excellent job of enforcing sales taxes with almost no enforcement cost: https://abovethelaw.com/2019/10/in-some-countries-your-receipt-can-be-a-winning-lottery-ticket-and-can-help-the-government-collect-sales-tax/ https://abovethelaw.com/2019/10/in-some-countries-your-recei...
- austincheney 6y ago
  I am not sure how sales taxes are less efficient than manually audited income taxes with itemized deductions. Sales taxes are largely automated.
throwawayzRUU6f 6y ago
Wealth tax, implemented properly without obvious loopholes (1) would be incredibly popular, as long as it shifts taxation from income to wealth. However, wealth taxes are unpopular when they're introduced as an additional tax burden. It's a bit similar to how the car industry introduced gimped, ugly, overpriced electric vehicles to "prove" the public doesn't want them. The same principle - badly thought out wealth taxes in return for nothing - just to prove the public dislikes them. Malicious compliance on political level. Nothing unites mainstream political parties as much as the dislike for taxing wealth. (1) proposals like radical markets wealth tax create an uncheatable system
- austincheney 6y ago
  What exactly is a wealth tax, as in what asset is taxed? Is that an estate tax?
yellowapple 6y ago
> but land value tax would probably be great. Unfortunately, people tend to vote against it. Which is a shame, since it's about as ideal of a tax as you can get: - You can't move land to an offshore account - LVT penalizes land speculation, which is one of the main drivers of suburban sprawl and rising housing costs - It targets the rich, and marginally (if at all) impacts the lower and middle classes (replacing all taxes with LVT would almost certainly reduce middle class tax burdens and entirely eliminate lower class tax burdens) - All economic activities ultimately depend on land in some way, so instead of taxing (and thus suppressing) those economic activities, it's ultimately more economically efficient to tax land itself - The aforementioned economic activities can't readily price LVT into their own prices for goods and services, specifically because land value itself is a function of the goods and services that land enables, and because if those goods and services could actually fetch a higher price without reducing profitability (per supply v. demand), then they would almost certainly already be priced accordingly, regardless of LVT And this is just from physical land in the commonly-understood sense (i.e. some chunk of the surface area of the oblate spheroid we call Earth). There are myriad other sorts of things with the same characteristics as land; everything from geostationary orbits to intellectual property to radio spectra to IP addresses (and just about anything else with an inelastic supply) represents economic rent waiting to be collected.
- AnimalMuppet 6y ago
  > - It targets the rich, and marginally (if at all) impacts the lower and middle classes (replacing all taxes with LVT would almost certainly reduce middle class tax burdens and entirely eliminate lower class tax burdens) The lower class still live somewhere. If you go to a land tax, their landlord isn't going to just eat that. It will be passed on to the renters. - All economic activities ultimately depend on land in some way, so instead of taxing (and thus suppressing) those economic activities, it's ultimately more economically efficient to tax land itself Here's a software-only startup that works fully remote. How does that economic activity depend on land? It doesn't, except for the workers' living places. But they'd still have living places even if they were unemployed. But I kind of agree with your last paragraph. If you are going to go with a "land use" tax, well, Google owns some buildings with servers in them, but the most valuable thing they own is google.com.

austincheney 6y ago

Everybody makes purchases. Including the wealthy charities and endowments specified in the article. Get them all in a way they cannot hide. This is the most fair approach. The moment you invent a bunch of nonsense special cases to target the rich is where they can use special cases to hide. If you want to talk about how sales taxes disadvantage the poor what are some examples? School supplies, clothes, and backpacks? These are all generally low cost items. I am aware of how that works financially having once been poor myself.

CorrectHorseBat 6y ago
They are low cost items, but poor people also have less money to spend so that cancels out. Here's an example: Sales tax of 10%, poor person has an income of $1000 per month and spends it all. 10%/$100 of income goes to tax. Rich person has an income of $10000 per month. They spends $5000 and save $5000. 5%/$500 of income goes to tax. That's like a reverse progressive income, arguably very disadvantageous for the poor.
- austincheney 6y ago
  I already mentioned I have once been poor myself and know how this works. Your simplified arithmetic is not a comprehensive financial scenario. When I was poor we were dependent upon hand-me downs and school assistance programs to cover many of the essentials.
  - CorrectHorseBat 6y ago
    How does that change anything? You're just moving the burden to the nearly-poor who can't rely on those things. edit: don't forget that for your scheme to work we would need to increase sale tax. Unless you had zero income when being poor it would still negatively effect you.
- Turing_Machine 6y ago
  There are ways around this. You could minimize the accounting by setting a rebate level, then issuing a check to everyone (yes, even the rich people) for that amount. To use your numbers, if you issued a rebate check for $100/month to everyone, the poor person would pay an effective rate of zero, while the rich person would still pay an effective rate of $400/month.