5 ms·

What should the sales tax be progressive on? You don't know the buyer's income when they pay for stuff. Some usage taxes might work, but unless they specifical

by raquo 12y ago

What should the sales tax be progressive on? You don't know the buyer's income when they pay for stuff. Some usage taxes might work, but unless they specifically target out-of-canton persons, they will just drive more rich people out of Zurich, exacerbating the problem. At the end of the day having every 20x30 miles plot of your country independently decide on taxation is not be the best idea. Different tax regimes can only coexist when taxpayers' mobility is limited, otherwise the cheapest tax-land wins. EDIT: I forgot to mention that standard sales tax is regressive by nature (poor people spend a much higher percent of their income than rich people).

Zarkonnen 12y ago
Thanks for that - I was trying to figure out how to respond, and you did it much better than I would have.
cpursley 12y ago
Good point, I should clarify: A progressive sales tax not based on purchasers income, but the type of good. For example, luxury goods should be taxed higher and basic staples very low to none. This the wealthy could not avoid tax by simply shifting money around political jurisdictions. This system would encourage transparency, encourage wealth creation as well as thrift in lower and middle income earners. Also, a side benefit (not that I entirely agree with it) is this is a way to enforce social policy like healthy eating. Tax unhealthy items like sugary food and tobacco highly (up to a point). This is done already in the United States successfully. And if you want more tube riders and less drivers in a city, have a very high toll and vehicle purchase tax. Singapore does this successfully. Some countries that have no income tax already employ this to an extent by taxing certain sales and imports. I think this type of system is worth experimenting with at least on the city-state or state level (canton / province / state). If it does not work, you can always go back. There's been talk of this type of system in the US but it's not likely to gain traction. The real reason for progressive income tax is not good policy, but divide and conquer class politics. Something all sides of the political probably spectrum agree with: governments need to be good stewards of tax revenue no matter the collection method. https://en.wikipedia.org/wiki/FairTax https://en.wikipedia.org/wiki/FairTax (note the section on prebates for poor people - similar to basic income).
- ptaipale 12y ago
  This kind of proposals tend to ignore how mobile wealthy people are. They might have more than one home - say, one in US, onw in Switzerland, one in Hong Kong, etc - and they might have luxury items here and there. Taxing such things with wildly different percentages is not going to work very well. The rich guys will just shop for that jewellery in Dubai and keep it in Hong Kong. Will you require him/her to declare and pay tax on it if he brings it to Paris for throwing a party there? Not likely going to work out. Effectively, a country engaging in such tax procedures would be throwing out rich people, and while I can hear the jeers of "good riddance", I'm afraid that it's not really a good thing for tax revenues.
  - cpursley 12y ago
    What's the difference between what you brought up and wealthy people just moving their holding companies to jurisdictions with lower capital gains and earnings tax? People should be mobile as they want to be in free societies. Do we believe that the state owns their citizens or a portion of those citizens working lives? The income tax presumes they do.
    - ptaipale 12y ago
      None, really, I wasn't trying to show such difference. Of course the same thing applies to many kinds of wealth. Except land, which you cannot very easily move from one jurisdiction to another. Edit: One recent example of the latter comes to my mind, of course. This is the case of properties in Crimea, now annexed by Russia. This is effectively a jurisdiction change. And it has some practical consequences, of course, although maybe not immediately related to tax; Crimean people need to register their properties into the Russian system, because Ukrainian property ownership is not recognized by the new powers-that-be. And registering is not free, and not even cheap, from what I hear.
- raquo 12y ago
  That's interesting! Though after reading so many pros & cons of FairTax on wiki, I'm still not convinced it's a good idea. The potential downsides are pretty dramatic: * Easier tax evasion (first-party reporting, B2B untaxed) * Discouraging of consumption (encouraging saving, DIY & black markets) * Income-regressive nature of consumption That said, some of the upsides are pretty good too. And if we were switching from FairTax to the current system, the latter would seem even more insane.

by raquo 12y ago

Zarkonnen 12y ago

Thanks for that - I was trying to figure out how to respond, and you did it much better than I would have.

cpursley 12y ago

Good point, I should clarify: A progressive sales tax not based on purchasers income, but the type of good. For example, luxury goods should be taxed higher and basic staples very low to none. This the wealthy could not avoid tax by simply shifting money around political jurisdictions. This system would encourage transparency, encourage wealth creation as well as thrift in lower and middle income earners. Also, a side benefit (not that I entirely agree with it) is this is a way to enforce social policy like healthy eating. Tax unhealthy items like sugary food and tobacco highly (up to a point). This is done already in the United States successfully. And if you want more tube riders and less drivers in a city, have a very high toll and vehicle purchase tax. Singapore does this successfully. Some countries that have no income tax already employ this to an extent by taxing certain sales and imports. I think this type of system is worth experimenting with at least on the city-state or state level (canton / province / state). If it does not work, you can always go back. There's been talk of this type of system in the US but it's not likely to gain traction. The real reason for progressive income tax is not good policy, but divide and conquer class politics. Something all sides of the political probably spectrum agree with: governments need to be good stewards of tax revenue no matter the collection method. https://en.wikipedia.org/wiki/FairTax https://en.wikipedia.org/wiki/FairTax (note the section on prebates for poor people - similar to basic income).

ptaipale 12y ago
This kind of proposals tend to ignore how mobile wealthy people are. They might have more than one home - say, one in US, onw in Switzerland, one in Hong Kong, etc - and they might have luxury items here and there. Taxing such things with wildly different percentages is not going to work very well. The rich guys will just shop for that jewellery in Dubai and keep it in Hong Kong. Will you require him/her to declare and pay tax on it if he brings it to Paris for throwing a party there? Not likely going to work out. Effectively, a country engaging in such tax procedures would be throwing out rich people, and while I can hear the jeers of "good riddance", I'm afraid that it's not really a good thing for tax revenues.
- cpursley 12y ago
  What's the difference between what you brought up and wealthy people just moving their holding companies to jurisdictions with lower capital gains and earnings tax? People should be mobile as they want to be in free societies. Do we believe that the state owns their citizens or a portion of those citizens working lives? The income tax presumes they do.
  - ptaipale 12y ago
    None, really, I wasn't trying to show such difference. Of course the same thing applies to many kinds of wealth. Except land, which you cannot very easily move from one jurisdiction to another. Edit: One recent example of the latter comes to my mind, of course. This is the case of properties in Crimea, now annexed by Russia. This is effectively a jurisdiction change. And it has some practical consequences, of course, although maybe not immediately related to tax; Crimean people need to register their properties into the Russian system, because Ukrainian property ownership is not recognized by the new powers-that-be. And registering is not free, and not even cheap, from what I hear.
raquo 12y ago
That's interesting! Though after reading so many pros & cons of FairTax on wiki, I'm still not convinced it's a good idea. The potential downsides are pretty dramatic: * Easier tax evasion (first-party reporting, B2B untaxed) * Discouraging of consumption (encouraging saving, DIY & black markets) * Income-regressive nature of consumption That said, some of the upsides are pretty good too. And if we were switching from FairTax to the current system, the latter would seem even more insane.