7 ms·

Indirect taxes (sales taxes, GST, and VAT) are more efficient than income taxes, both from a compliance perspective and a fairness perspective. Compliance-wise

Indirect taxes (sales taxes, GST, and VAT) are more efficient than income taxes, both from a compliance perspective and a fairness perspective. Compliance-wise, it's easiest to calculate and collect the tax on economic activity when an economic transaction occurs. From a fairness perspective, it's clear when an indirect tax applies; with income taxes you need a convoluted code to address the many types of income possible in a modern society.

gruez 3y ago
>and a fairness perspective. that's arguable when they're not progressive and arguably regressive. Rich people earn more, but they spend less (as % of income) than poor people.
- pas 3y ago
  it's possible to tax luxury stuff more, etc.
  - gruez 3y ago
    Then that makes it harder to collect/enforce. What counts as luxury? What if someone poor wants to buy a luxury item as a treat?
    - hamandcheese 3y ago
      Various goods are already tax-exempt or tax-reduced, like groceries.
    - maximus-decimus 3y ago
      Then they pay taxes on the luxury but not their spaghetti.
    - sofixa 3y ago
      This is a solved problem, with different VAT rates. For instance in France there's a 2% rate for crucial things like medicine and some foods, 5% for other important things like electricity, 10% regular reduced rate and 20% for everything else. You can therefore easily target by saying this category of goods gets this VAT rate. E.g. jewelry being at 20% will only impact well off buyers.
      - gruez 3y ago
        I would hardly call it "solved". For the examples given: >medicine Semaglutide is a weight loss treatment that costs $10+k a year. It is ostensibly a luxury for the well-off. Does it fall under the 2% rate for medicine? >and some foods How is that determined? For instance, Parmigiano Reggiano DOP aged 48 months is arguably a luxury, but generic parmesan cheese isn't. Even if you could draw a line somewhere between the two, it's hardly trivial to do this for good ever. You either have to accept some absurd situations like the above, or have a sprawling bureaucracy tasked with determining what's a "luxury" or not. > E.g. jewelry being at 20% will only impact well off buyers. And what of a poor couple that's getting married? I agree such a tax might be approximate progressive (ie. on average the top 20% pays a higher tax than the bottom 20%), but it leaves much to be desired from a "fairness" perspective. A multi-millionaire driving a Corolla gets taxed more than some army recruit that just blew their signing bonus on a BMW. You also can't implement higher brackets on higher earning individuals as easily. How do you tax the likes of Bezos? It's not like they buy 100x more luxury items because they make 100x more. Most of their money is spent on investments, not consumption.
        sofixa 3y ago
        > Semaglutide is a weight loss treatment that costs $10+k a year. It is ostensibly a luxury for the well-off. Does it fall under the 2% rate for medicine? Trivially resolved. In France only medicine which can be reimbursed by social security (so only actual things that can be prescribed and work, not optional luxury or homeopathy crap). > Parmigiano Reggiano DOP aged 48 months is arguably a luxury In France I doubt there's any differentiation of fancy vs non-fancy versions of foods, let alone cheeses. It'd be insulting to the nation to contemplate such a thing. > And what of a poor couple that's getting married I didn't know jewellery was a prerequisite to getting married.
        gruez 3y ago
        >(so only actual things that can be prescribed and work, not optional luxury or homeopathy crap). I'm not sure what you're trying to say. Semaglutide has been approved (ie. has proven to work) for the treatment of obesity. >In France I doubt there's any differentiation of fancy vs non-fancy versions of foods, let alone cheeses. It'd be insulting to the nation to contemplate such a thing. Do you know this for a fact or just simply guessing? I find it very unlikely that France (or any other free market economy) doesn't practice product segmentation for foods. >I didn't know jewellery was a prerequisite to getting married. But poor and middle class people buy "luxury" stuff as well. When that happens, how is it fair that they're getting taxed the same as Bezos buying a mega-yach?
- gamblor956 3y ago
  Yes, and this can easily be accounted for by not taxing necessities (or taxing them at the lowest rate), which is what most of the U.S. and EU already do. "Luxury" items and other goods are subject to higher tax rates. Educational items are treated as their own category of goods in many places. Alcohol is often broken out from the luxury category and taxed at an even higher rate. Some places tax sports events but not cultural events. And those are all things that are very easy to do at the time-of-transaction because all of the necessary information is available and the calculation is trivial.
Zak 3y ago
> with income taxes you need a convoluted code to address the many types of income possible in a modern society. Do you? You could tax all income the same way, but governments seem to like having the ability to use the tax code to incentivize certain ways of making money over others.
- BobbyJo 3y ago
  You're hand waving away what the same way means. What if I make 500k once every five years? Should I pay taxes like I make 500k every year once, and nothing the other 4 years? Should I be able to amortize that across 5 years? What if I bought a house and flipped it as a business venture? What costs count toward the business and what doesn't? You have to define all of that before you know what you've earned. Income is complicated, whereas a single transaction is very simple.

gruez 3y ago

>and a fairness perspective. that's arguable when they're not progressive and arguably regressive. Rich people earn more, but they spend less (as % of income) than poor people.

pas 3y ago
it's possible to tax luxury stuff more, etc.
- gruez 3y ago
  Then that makes it harder to collect/enforce. What counts as luxury? What if someone poor wants to buy a luxury item as a treat?
  - hamandcheese 3y ago
    Various goods are already tax-exempt or tax-reduced, like groceries.
  - maximus-decimus 3y ago
    Then they pay taxes on the luxury but not their spaghetti.
  - sofixa 3y ago
    This is a solved problem, with different VAT rates. For instance in France there's a 2% rate for crucial things like medicine and some foods, 5% for other important things like electricity, 10% regular reduced rate and 20% for everything else. You can therefore easily target by saying this category of goods gets this VAT rate. E.g. jewelry being at 20% will only impact well off buyers.
    - gruez 3y ago
      I would hardly call it "solved". For the examples given: >medicine Semaglutide is a weight loss treatment that costs $10+k a year. It is ostensibly a luxury for the well-off. Does it fall under the 2% rate for medicine? >and some foods How is that determined? For instance, Parmigiano Reggiano DOP aged 48 months is arguably a luxury, but generic parmesan cheese isn't. Even if you could draw a line somewhere between the two, it's hardly trivial to do this for good ever. You either have to accept some absurd situations like the above, or have a sprawling bureaucracy tasked with determining what's a "luxury" or not. > E.g. jewelry being at 20% will only impact well off buyers. And what of a poor couple that's getting married? I agree such a tax might be approximate progressive (ie. on average the top 20% pays a higher tax than the bottom 20%), but it leaves much to be desired from a "fairness" perspective. A multi-millionaire driving a Corolla gets taxed more than some army recruit that just blew their signing bonus on a BMW. You also can't implement higher brackets on higher earning individuals as easily. How do you tax the likes of Bezos? It's not like they buy 100x more luxury items because they make 100x more. Most of their money is spent on investments, not consumption.
      - sofixa 3y ago
        > Semaglutide is a weight loss treatment that costs $10+k a year. It is ostensibly a luxury for the well-off. Does it fall under the 2% rate for medicine? Trivially resolved. In France only medicine which can be reimbursed by social security (so only actual things that can be prescribed and work, not optional luxury or homeopathy crap). > Parmigiano Reggiano DOP aged 48 months is arguably a luxury In France I doubt there's any differentiation of fancy vs non-fancy versions of foods, let alone cheeses. It'd be insulting to the nation to contemplate such a thing. > And what of a poor couple that's getting married I didn't know jewellery was a prerequisite to getting married.
        gruez 3y ago
        >(so only actual things that can be prescribed and work, not optional luxury or homeopathy crap). I'm not sure what you're trying to say. Semaglutide has been approved (ie. has proven to work) for the treatment of obesity. >In France I doubt there's any differentiation of fancy vs non-fancy versions of foods, let alone cheeses. It'd be insulting to the nation to contemplate such a thing. Do you know this for a fact or just simply guessing? I find it very unlikely that France (or any other free market economy) doesn't practice product segmentation for foods. >I didn't know jewellery was a prerequisite to getting married. But poor and middle class people buy "luxury" stuff as well. When that happens, how is it fair that they're getting taxed the same as Bezos buying a mega-yach?
gamblor956 3y ago
Yes, and this can easily be accounted for by not taxing necessities (or taxing them at the lowest rate), which is what most of the U.S. and EU already do. "Luxury" items and other goods are subject to higher tax rates. Educational items are treated as their own category of goods in many places. Alcohol is often broken out from the luxury category and taxed at an even higher rate. Some places tax sports events but not cultural events. And those are all things that are very easy to do at the time-of-transaction because all of the necessary information is available and the calculation is trivial.

Zak 3y ago

> with income taxes you need a convoluted code to address the many types of income possible in a modern society. Do you? You could tax all income the same way, but governments seem to like having the ability to use the tax code to incentivize certain ways of making money over others.

BobbyJo 3y ago
You're hand waving away what the same way means. What if I make 500k once every five years? Should I pay taxes like I make 500k every year once, and nothing the other 4 years? Should I be able to amortize that across 5 years? What if I bought a house and flipped it as a business venture? What costs count toward the business and what doesn't? You have to define all of that before you know what you've earned. Income is complicated, whereas a single transaction is very simple.