4 ms·

I would much rather see a completely consumption based tax system. The mortgage interest and charity reductions could easily be left in.

by sunsu 15y ago

nkohari 15y ago
If you replaced all taxes with a simple sales tax, it'd be even more regressive, since a gallon of milk (for example) has a higher relative cost to someone who makes $20,000 than someone who makes $2,000,000. Also, it could have an unintentionally bad effect on our (now very consumer-driven) economy. You don't want to discourage people from spending money.
- mattgreenrocks 15y ago
  What if we special-cased the essential consumables a bit? Not very elegant, and probably a bit exploitable, but I can't think of any glaring holes (yet). As for your second objection, I don't see the issue. If they don't want to be taxed, they can forego buying something.
  - icebraining 15y ago
    As for your second objection, I don't see the issue. If they don't want to be taxed, they can forego buying something. That's parent's point: if I one buys less because of the tax, that's means someone or some company has lost a sale, which means they'll need to cut back on spending, etc. In a consumption based economy, you want money to be constantly re-injected into the economy to prevent stagnation.
    - mattgreenrocks 15y ago
      Then perhaps it's time to move past a consumption based economy. We already have too much crap.
      - icebraining 15y ago
        Well, consumption doesn't have to be physical stuff you buy. Paying for services or digital content is still consumption.
- yummyfajitas 15y ago
  On the other hand, a consumption tax taxes people proportionally to the benefits they receive from society. It might be less progressive w.r.t. income than our current system, but it is arguably more fair. It's also hardly clear that the tax burden is even felt by the rich. Consider an investor with millions in investments who only consumes $50k/year. He would like to invest in his new venture, a medical search engine. But because of the taxation, he has less money for this investment. Think: who is forced to consume less as a result of taxation? The rich man continues to consume $50k/year. Instead, goods and services have been redistributed from the medical search engine to government uses. The real question about taxing investors: do we believe the government will spend the money better than Fred Wilson would? See also: http://www.thebigquestions.com/2011/04/18/the-man-who-cant-be-taxed/ http://www.thebigquestions.com/2011/04/18/the-man-who-cant-b...
  - notahacker 15y ago
    The ability to choose when to work and on what terms is a vastly greater benefit than mere consumption goods. Your link is really unhelpful to the idea of consumption taxes and I'm actually surprised to see you post a line of reasoning that suggests allocation of fiat money is zero sum in the medium term, especially in response to someone making a point about the economy being driven by consumption. The $84 million belonging to Mr Kendrick might have been invested in US businesses providing valuable services (although if his private wealth managers are competent, he'd have been better off investing in foreign companies or shorting the housing market in the last few years. Earlier on, maybe, or maybe he'd have done fine placing speculative bets on asset bubbles that create nothing except liquidity for malinvestment and problems afterwards). But given the existence of fiat money created by the fractional reserve system, taxing Mr Kendrick's wealth shouldn't result in a reduction in the supply of bank loans unless the banks are running low on reserves. The government has a whole host of non-fiscal policy instruments to encourage more loans if that's the problem. It's not a straight opportunity cost decision since the government isn't consuming the money out of existence, even if their spending is utterly devoid of foresight. Welfare check recipients and pointless bureaucrats consume much greater proportions of their income, which ultimately returns via a flows back into the hands of private investors via the mechanism of people actually buying products. Investors, especially passive ones apparently indifferent to returns, don't create profit; consumers buying things do. Shifting the burden from income to consumption taxes discourages that spending, especially if the government has to recoup the revenues Mr Kendrick's $84 million from people that actually get put off by higher prices. If consumers buy less, even Fred Wilson isn't going to get good returns from his investments.
orangecat 15y ago
The mortgage interest and charity reductions could easily be left in. But shouldn't be. Especially mortgage interest; it should be painfully clear by now that blindly encouraging people to buy houses is not a good plan.

I would much rather see a completely consumption based tax system. The mortgage interest and charity reductions could easily be left in.

by sunsu 15y ago

I would much rather see a completely consumption based tax system. The mortgage interest and charity reductions could easily be left in.

nkohari 15y ago

If you replaced all taxes with a simple sales tax, it'd be even more regressive, since a gallon of milk (for example) has a higher relative cost to someone who makes $20,000 than someone who makes $2,000,000. Also, it could have an unintentionally bad effect on our (now very consumer-driven) economy. You don't want to discourage people from spending money.

mattgreenrocks 15y ago
What if we special-cased the essential consumables a bit? Not very elegant, and probably a bit exploitable, but I can't think of any glaring holes (yet). As for your second objection, I don't see the issue. If they don't want to be taxed, they can forego buying something.
- icebraining 15y ago
  As for your second objection, I don't see the issue. If they don't want to be taxed, they can forego buying something. That's parent's point: if I one buys less because of the tax, that's means someone or some company has lost a sale, which means they'll need to cut back on spending, etc. In a consumption based economy, you want money to be constantly re-injected into the economy to prevent stagnation.
  - mattgreenrocks 15y ago
    Then perhaps it's time to move past a consumption based economy. We already have too much crap.
    - icebraining 15y ago
      Well, consumption doesn't have to be physical stuff you buy. Paying for services or digital content is still consumption.
yummyfajitas 15y ago
On the other hand, a consumption tax taxes people proportionally to the benefits they receive from society. It might be less progressive w.r.t. income than our current system, but it is arguably more fair. It's also hardly clear that the tax burden is even felt by the rich. Consider an investor with millions in investments who only consumes $50k/year. He would like to invest in his new venture, a medical search engine. But because of the taxation, he has less money for this investment. Think: who is forced to consume less as a result of taxation? The rich man continues to consume $50k/year. Instead, goods and services have been redistributed from the medical search engine to government uses. The real question about taxing investors: do we believe the government will spend the money better than Fred Wilson would? See also: http://www.thebigquestions.com/2011/04/18/the-man-who-cant-be-taxed/ http://www.thebigquestions.com/2011/04/18/the-man-who-cant-b...
- notahacker 15y ago
  The ability to choose when to work and on what terms is a vastly greater benefit than mere consumption goods. Your link is really unhelpful to the idea of consumption taxes and I'm actually surprised to see you post a line of reasoning that suggests allocation of fiat money is zero sum in the medium term, especially in response to someone making a point about the economy being driven by consumption. The $84 million belonging to Mr Kendrick might have been invested in US businesses providing valuable services (although if his private wealth managers are competent, he'd have been better off investing in foreign companies or shorting the housing market in the last few years. Earlier on, maybe, or maybe he'd have done fine placing speculative bets on asset bubbles that create nothing except liquidity for malinvestment and problems afterwards). But given the existence of fiat money created by the fractional reserve system, taxing Mr Kendrick's wealth shouldn't result in a reduction in the supply of bank loans unless the banks are running low on reserves. The government has a whole host of non-fiscal policy instruments to encourage more loans if that's the problem. It's not a straight opportunity cost decision since the government isn't consuming the money out of existence, even if their spending is utterly devoid of foresight. Welfare check recipients and pointless bureaucrats consume much greater proportions of their income, which ultimately returns via a flows back into the hands of private investors via the mechanism of people actually buying products. Investors, especially passive ones apparently indifferent to returns, don't create profit; consumers buying things do. Shifting the burden from income to consumption taxes discourages that spending, especially if the government has to recoup the revenues Mr Kendrick's $84 million from people that actually get put off by higher prices. If consumers buy less, even Fred Wilson isn't going to get good returns from his investments.

orangecat 15y ago

The mortgage interest and charity reductions could easily be left in. But shouldn't be. Especially mortgage interest; it should be painfully clear by now that blindly encouraging people to buy houses is not a good plan.