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A national sales tax is the most regressive tax possible. While an income tax captures all income, at least in theory, a sales tax doesn’t apply to money that

A national sales tax is the most regressive tax possible. While an income tax captures all income, at least in theory, a sales tax doesn’t apply to money that isn’t immediately spent. It doesn’t apply to money that is parked in the stock market, spend outside the country, spend on personal employees like your butler, and, depending on specifics, real estate. So in terms of real-world effects, this is rather transparently a wet dream for the super-rich and, maybe, some of their lesser friends. It will allow, by definition, people earning twice as much as they can currently spend to cut their contribution to society in half, with those spending most of what they make on consumables auch as food or clothes on the hook to make up the difference.

Jtsummers 5y ago
Yep. The proponents will point out the prebate, which is nice. It means that someone making below the poverty level income will get either a small bonus or pay 0% (it's reasonably safe to assume most people at that income don't have, unless they're a dependent, much ability to save). It helps. However, once you start getting to middle incomes and upper incomes it quickly becomes regressive, like all sales tax-based proposals. People earning $1 million a year aren't spending $1 million a year, or would be able to spend or invest it on things that this tax doesn't cover. A family with $100k/year gross income would find themselves paying a higher percentage than that millionaire.
- Joeri 5y ago
  On top of that, the rich make most of their purchases through corporations, which means that in practice not much would change. With any “fair” taxation scheme you always have to ask who pays less and who pays more. Whenever I dig into these schemes it’s always one of the middle groups of tax payers who end up paying more.
- mister_tee 5y ago
  my calculations might be incorrect but is the prebate at federal poverty level usually less generous than the current system? Two people, married filing joint status: currently $25k standard deduction. Current FPL for two: $17.4k. I picked a couple with no kids because the higher refundable child tax credits just started and raise the bar for where federal income taxes start on a family of four (nb: they pay many other taxes: state, FICA, sales, property...) There is a talking point from some on the right that 47% of US households pay no federal income tax that also makes me think this could be a net negative for many.
  - Jtsummers 5y ago
    Probably. I only meant that it helped for this tax to make it slightly progressive (the very low end) because they’re emote likely to spend everything and so the prebate has a major impact on their effective tax rate. I didn’t do the math to see how it compares to the present system overall.
    - mister_tee 5y ago
      sorry, I was questioning this aspect of the system rather than your post. I'm definitely not a tax expert but this seems like a raw deal for middle class and below... not to get too political but we can also look at which groups design and support proposals like this.
dragonwriter 5y ago
> A national sales tax is the most regressive tax possible. No, its not. I mean, have you heard of capitation?

Jtsummers 5y ago

Yep. The proponents will point out the prebate, which is nice. It means that someone making below the poverty level income will get either a small bonus or pay 0% (it's reasonably safe to assume most people at that income don't have, unless they're a dependent, much ability to save). It helps. However, once you start getting to middle incomes and upper incomes it quickly becomes regressive, like all sales tax-based proposals. People earning $1 million a year aren't spending $1 million a year, or would be able to spend or invest it on things that this tax doesn't cover. A family with $100k/year gross income would find themselves paying a higher percentage than that millionaire.

Joeri 5y ago
On top of that, the rich make most of their purchases through corporations, which means that in practice not much would change. With any “fair” taxation scheme you always have to ask who pays less and who pays more. Whenever I dig into these schemes it’s always one of the middle groups of tax payers who end up paying more.
mister_tee 5y ago
my calculations might be incorrect but is the prebate at federal poverty level usually less generous than the current system? Two people, married filing joint status: currently $25k standard deduction. Current FPL for two: $17.4k. I picked a couple with no kids because the higher refundable child tax credits just started and raise the bar for where federal income taxes start on a family of four (nb: they pay many other taxes: state, FICA, sales, property...) There is a talking point from some on the right that 47% of US households pay no federal income tax that also makes me think this could be a net negative for many.
- Jtsummers 5y ago
  Probably. I only meant that it helped for this tax to make it slightly progressive (the very low end) because they’re emote likely to spend everything and so the prebate has a major impact on their effective tax rate. I didn’t do the math to see how it compares to the present system overall.
  - mister_tee 5y ago
    sorry, I was questioning this aspect of the system rather than your post. I'm definitely not a tax expert but this seems like a raw deal for middle class and below... not to get too political but we can also look at which groups design and support proposals like this.

dragonwriter 5y ago

> A national sales tax is the most regressive tax possible. No, its not. I mean, have you heard of capitation?