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Perhaps I'll seem naive, but surely it only makes sense to judge a tax in comparison the taxes it could replace. Is taxing consumption better or worse than tax

Perhaps I'll seem naive, but surely it only makes sense to judge a tax in comparison the taxes it could replace. Is taxing consumption better or worse than taxing earned income? The total level of taxation is a different question.

ThunderSizzle 3y ago
Both are fine forms of taxation. Taxation of wages is evil, and they get around it by pretending wages are income, as opposed to a trade of time for money.
- OJFord 3y ago
  If you're serious this is way too deep for me at this time - can you expand on the difference?
  - ThunderSizzle 3y ago
    Basically, the IRS only taxes profit, not gross income. In business, if you pay rent, or buy equipment, your income is deducted by those expenses. The IRS pretends there isn't a cost to wages - that they are profit. You can't deduct any expense accrued to make or keep yourself able to work, nor can you deduct the time lost to make a wage. In other words, if there is no gain, there is no income, and since wages is a compensation for a person's expense (aka their time and effort of being able to work), it's not income. The act of charging income tax on W-2 employees is a travesty we let upon ourselves. The sad thing is if most w-2 employees just re-orged as contractors, many of their expenses could at least be considered for deductions.
    - badpun 3y ago
      The government needs to raise a certain amount of money every year, and the rest is pretty much details. So, if wage workers could deduct expenses from pre-tax income, the government would just raise tax rates to compensate.
    - OJFord 3y ago
      Ah I see what you mean now, interesting point. I'm not subject to the IRS fwiw, but the same holds. You're leaving it sort of implicit though that personal tax should be treated the same as corporate, which isn't clear to me?
    - sokoloff 3y ago
      I realize you're making a moral argument more than an economic argument, but the economic argument is still a consistent one. You generally can't deduct more than your basis for something you sold. Your basis in an hour of your labor is $0. That's true whether you're paid W-2 or 1099.
      - ThunderSizzle 3y ago
        You claim the basis of an hour of labor is $0. The various US government entities (DOT, EPA, HHS) uses a statistical life value of around $10 million (probably higher now due to inflation). The average American works ~1800 hours a year, and, if counting from 18 to 68, can work 50 years, or 90000 hours in an average working life. If you think solely economically, then the statistical hourly value is $111/hour ($10,000,000 / 90,000). That's your cost-basis for an average human's work-hour, per the statistic value of a human life. Of course, the $10 million isn't solely an economic number, since human life is technically priceless and has a moral value, which then brings the argument back to morality.
        sokoloff 3y ago
        Tax basis is based on what you paid for an item, not what it's theoretically "worth". If I buy an item that's "theoretically worth $10M" for $N, my basis in it is $N, not $10M.
        ThunderSizzle 3y ago
        Yes, that's how the current rules work. The rules are wrong, but you are correct on how they currently work. The fact that tax basis doesn't account for inflation is an intentional hidden tax and another example of evil against the population.
sokoloff 3y ago
Taxing consumption is much harder to make progressive and achieve the presumed aim here. Consumption taxes start out heavily regressive, and require modifications to make them neutral or progressive. These might be excluding clothing and staple foods from sales tax or other tweaks to exclude the necessities of life, which lower-income people necessarily spend a greater portion of their income on. (Income taxes are quite easy to make progressive.)

ThunderSizzle 3y ago

Both are fine forms of taxation. Taxation of wages is evil, and they get around it by pretending wages are income, as opposed to a trade of time for money.

OJFord 3y ago
If you're serious this is way too deep for me at this time - can you expand on the difference?
- ThunderSizzle 3y ago
  Basically, the IRS only taxes profit, not gross income. In business, if you pay rent, or buy equipment, your income is deducted by those expenses. The IRS pretends there isn't a cost to wages - that they are profit. You can't deduct any expense accrued to make or keep yourself able to work, nor can you deduct the time lost to make a wage. In other words, if there is no gain, there is no income, and since wages is a compensation for a person's expense (aka their time and effort of being able to work), it's not income. The act of charging income tax on W-2 employees is a travesty we let upon ourselves. The sad thing is if most w-2 employees just re-orged as contractors, many of their expenses could at least be considered for deductions.
  - badpun 3y ago
    The government needs to raise a certain amount of money every year, and the rest is pretty much details. So, if wage workers could deduct expenses from pre-tax income, the government would just raise tax rates to compensate.
  - OJFord 3y ago
    Ah I see what you mean now, interesting point. I'm not subject to the IRS fwiw, but the same holds. You're leaving it sort of implicit though that personal tax should be treated the same as corporate, which isn't clear to me?
  - sokoloff 3y ago
    I realize you're making a moral argument more than an economic argument, but the economic argument is still a consistent one. You generally can't deduct more than your basis for something you sold. Your basis in an hour of your labor is $0. That's true whether you're paid W-2 or 1099.
    - ThunderSizzle 3y ago
      You claim the basis of an hour of labor is $0. The various US government entities (DOT, EPA, HHS) uses a statistical life value of around $10 million (probably higher now due to inflation). The average American works ~1800 hours a year, and, if counting from 18 to 68, can work 50 years, or 90000 hours in an average working life. If you think solely economically, then the statistical hourly value is $111/hour ($10,000,000 / 90,000). That's your cost-basis for an average human's work-hour, per the statistic value of a human life. Of course, the $10 million isn't solely an economic number, since human life is technically priceless and has a moral value, which then brings the argument back to morality.
      - sokoloff 3y ago
        Tax basis is based on what you paid for an item, not what it's theoretically "worth". If I buy an item that's "theoretically worth $10M" for $N, my basis in it is $N, not $10M.
        ThunderSizzle 3y ago
        Yes, that's how the current rules work. The rules are wrong, but you are correct on how they currently work. The fact that tax basis doesn't account for inflation is an intentional hidden tax and another example of evil against the population.

sokoloff 3y ago

Taxing consumption is much harder to make progressive and achieve the presumed aim here. Consumption taxes start out heavily regressive, and require modifications to make them neutral or progressive. These might be excluding clothing and staple foods from sales tax or other tweaks to exclude the necessities of life, which lower-income people necessarily spend a greater portion of their income on. (Income taxes are quite easy to make progressive.)