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The rich could spend less percentage wise of their income (they may also spend more since they have more disposable income), but they could also spend more in a

The rich could spend less percentage wise of their income (they may also spend more since they have more disposable income), but they could also spend more in a real dollar value wise which would generate more tax revenue. Taxing consumption already occurs: For example, if you drive a car you pay the gasoline tax and therefor pay more than a person who doesn't drive a car (who doesn't have to pay for fuel). Similarly, sales tax. The more you buy, the more tax you pay.

sp332 12y ago
Real dollar value of rich vs poor isn't the question. Unless something is horribly wrong, the rich will always pay more tax dollars than poor people! The question is taxing income vs taxing consumption. Taxing income means you get more money from rich people than you would if you only taxed their consumption, since they spend a smaller percentage of their income.
- lsaferite 12y ago
  Taxing consumption vs. taxing income promotes more savings and less consumption. Also, in theory, you simplify compliance and decrease evasion as your tax income comes from businesses and not individuals.
  - sp332 12y ago
    So, do you want rich people to save more of their money? Or would you rather structure the tax system to reward investment?
  - ronaldx 12y ago
    > Taxing consumption vs. taxing income promotes more savings and less consumption It promotes saving amongst people who can afford to save. For poor/normal people there are several priorities they are not meeting before they would reach savings. Poor people generally already consume way below their minimum preferred standard of living - given the option, they won't consume less. Rich people will consume less. And then, less consumption precludes trickle-down and decreases opportunities for those poor people. Overall, very bad.
    - lsaferite 12y ago
      I don't disagree. I'm not an economist so I can only look at it from what I think is logical. That being said, I read about the FairTax proposal a long time back and that is what turned me on to the idea of preferring consumption vs. income tax. In that proposal they actually address the issue via a poverty level spending tax rebate (prebate in the plan). If the net effect on the poor is basically a wash, do you still object to the idea? Do you also have a problem with the idea of less consumption as you feel it will overall hurt our economy? Personally I welcome the idea of burning the current tax code and starting fresh with a simple consumption tax collected by businesses. As a side note, the 'richer' people become, the more they find ways and can afford ways to avoid, and in some cases evade, paying taxes. The poor and lower-middle class cannot generally afford to do this. Not to mention large corporations and the games they play.
  - dragonwriter 12y ago
    > Taxing consumption vs. taxing income promotes more savings and less consumption. Right, but I don't want "more saving and less consumption" as much as I want more people to be able to afford to choose whether savings or consumption is best for them, and taxing things that the poor do more than the rich promotes less people being able to afford to choose whether savings or consumption is best. Marginal propensity to consume is pretty strongly negatively correlated with income at all levels, so even with poverty-level exemptions that create some progressivity at the lower end, consumption taxes are overall regressive in income. > Also, in theory, you simplify compliance and decrease evasion as your tax income comes from businesses and not individuals. This only makes sense, even in theory, if you start with the presumption that the average business is less likely to seek to manipulate things to minimize tax (whether through avoidance or evasion) than the average individual, which is an assumption which could use some justification.
    - lsaferite 12y ago
      Well, the point was by simplifying compliance due to a much smaller tax collection base, you reduce the likelihood of non-compliance due to the higher scrutiny.

sp332 12y ago

Real dollar value of rich vs poor isn't the question. Unless something is horribly wrong, the rich will always pay more tax dollars than poor people! The question is taxing income vs taxing consumption. Taxing income means you get more money from rich people than you would if you only taxed their consumption, since they spend a smaller percentage of their income.

lsaferite 12y ago
Taxing consumption vs. taxing income promotes more savings and less consumption. Also, in theory, you simplify compliance and decrease evasion as your tax income comes from businesses and not individuals.
- sp332 12y ago
  So, do you want rich people to save more of their money? Or would you rather structure the tax system to reward investment?
- ronaldx 12y ago
  > Taxing consumption vs. taxing income promotes more savings and less consumption It promotes saving amongst people who can afford to save. For poor/normal people there are several priorities they are not meeting before they would reach savings. Poor people generally already consume way below their minimum preferred standard of living - given the option, they won't consume less. Rich people will consume less. And then, less consumption precludes trickle-down and decreases opportunities for those poor people. Overall, very bad.
  - lsaferite 12y ago
    I don't disagree. I'm not an economist so I can only look at it from what I think is logical. That being said, I read about the FairTax proposal a long time back and that is what turned me on to the idea of preferring consumption vs. income tax. In that proposal they actually address the issue via a poverty level spending tax rebate (prebate in the plan). If the net effect on the poor is basically a wash, do you still object to the idea? Do you also have a problem with the idea of less consumption as you feel it will overall hurt our economy? Personally I welcome the idea of burning the current tax code and starting fresh with a simple consumption tax collected by businesses. As a side note, the 'richer' people become, the more they find ways and can afford ways to avoid, and in some cases evade, paying taxes. The poor and lower-middle class cannot generally afford to do this. Not to mention large corporations and the games they play.
- dragonwriter 12y ago
  > Taxing consumption vs. taxing income promotes more savings and less consumption. Right, but I don't want "more saving and less consumption" as much as I want more people to be able to afford to choose whether savings or consumption is best for them, and taxing things that the poor do more than the rich promotes less people being able to afford to choose whether savings or consumption is best. Marginal propensity to consume is pretty strongly negatively correlated with income at all levels, so even with poverty-level exemptions that create some progressivity at the lower end, consumption taxes are overall regressive in income. > Also, in theory, you simplify compliance and decrease evasion as your tax income comes from businesses and not individuals. This only makes sense, even in theory, if you start with the presumption that the average business is less likely to seek to manipulate things to minimize tax (whether through avoidance or evasion) than the average individual, which is an assumption which could use some justification.
  - lsaferite 12y ago
    Well, the point was by simplifying compliance due to a much smaller tax collection base, you reduce the likelihood of non-compliance due to the higher scrutiny.