Should we tax consumption instead of income and investment?

avatar · Jul 16, 2020

waddy said:
sure it's connected. How it's going to be spent and who decides how to spend it influences what kind of tax to collect and who should pay it.

ok...

JasperL · Jul 22, 2020

Waddy said:
We do tax consumption; sales tax is 10.25% where I live. And every product sold is taxed all along the supply chain, then I get taxed again when I buy it.

That's generally not true. In most states, raw materials aren't taxed nor are wholesale goods. The only taxed sale is the final one to the consumer. There is final 'consumption' by businesses - such as for computers, printers, office furniture, some machinery depending on the state - and that adds to the cost of goods sold to us indirectly, but the sales tax isn't levied but once per life cycle (in general).

BTW; where do you get the idea that rich people don't pay taxes on a Ferrari or selling stocks? Sales and property tax is still paid on that Ferrari; you're not exempt because you're rich. And have you heard of this tax called "Capital Gains"? Seems to be very popular with government tax people.

I do believe the rich 1% already pay more in taxes than everyone else COMBINED.

They pay a big share of federal income taxes, but nowhere near the majority of all taxes, including sales, payroll, property, etc.

But, yeah, let's do your plan. We erase all the other taxes and just tax consumption. You do realize that the lower down the economic ladder you go the higher percentage of your income goes for consumer goods, like food, medicine, clothing, gas, cars, etc. The poor spend almost all their income on consumer goods; the rich spend very little of their income on consumer goods. So bring on that big VAT tax.

VAT tax = retail sales tax = FAIR tax. They all tax the same thing. I agree mostly, but the argument for VATs and other consumption taxes is it makes a certain 'fairness' sense to tax the poor and middle class for social benefits like (in every country but the U.S.) universal healthcare, and other social spending.

And yeah we tried taxing luxury items back in the day. It destroyed the domestic yacht building industry. Rich people simply bought their yachts in Europe or Asia...and do to this day. And what's to stop them from buying that third home in France? Or China, or Mexico?

That's one reason luxury taxes don't work. The other is mostly that there's not a big enough base to raise the needed money. For every Ferrari, there are maybe 10,000 Fords sold....

JasperL · Jul 22, 2020

washunut said:
I am asking about your solution to this thread. We should know if you have skin in the game or are just about taxing others. My sense is the response above gives us the true answer so no need to reply.

FWIW, I'm for stock transaction fees and they'd impact us, but minimally, like everyone who 'invests' versus trades. I've seen arguments intended to be rigorous against them, but they don't impress me a whole lot. Mostly it appears they'd impact some low social value trading strategies, but that's a small loss IMO.

JasperL · Jul 22, 2020

washunut said:
Most big hedge funds and banks are run by democrats. Lets see if Biden passes this,I doubt it because it makes no sense.

Hedge funds and banks don't have political ideologies.... And frankly it's hard to look at the tax plans offered by the two parties and conclude that it's the Democrats pandering to the Fortune 500 and Wall Street crowd. The TCJA was pretty good to that group, as was Bush's tax cuts, and Reagan's, until TRA 86....

JasperL · Jul 22, 2020

cpwill said:
not me. I think fairtax is (sadly) probably no longer workable as currently structured, simply because you lose a year of revenue during the shift. If that could be fixed, I'd be a supporter again (though, of course, I remain a fan of the perfectly progressive and negative income tax I laid out in the Loft)

But, if we could shift over to taxing consumption instead of property, income, and investment, I think that would be fantastic for our long-term health.

And fantastic to the plutocrats, of course, which is why those guys always push for consumption taxes. And without an estate tax (always eliminated in these plans...), it's a great way to create a new American aristocracy. The Waltons and Bezos families and those like them could fund their consumption taxes by investment income earned through roughly January 2 or 3 each year, spend the other 360 days building wealth, then pass it along to the kiddies tax free, gaining power and influence every year.

cpwill · Jul 22, 2020

JasperL said:
And fantastic to the plutocrats, of course, which is why those guys always push for consumption taxes. And without an estate tax (always eliminated in these plans...), it's a great way to create a new American aristocracy. The Waltons and Bezos families and those like them could fund their consumption taxes by investment income earned through roughly January 2 or 3 each year, spend the other 360 days building wealth, then pass it along to the kiddies tax free, gaining power and influence every year.

:shrug: good for them?

JasperL · Jul 22, 2020

Waddy said:
Closing loopholes is far different than simply "tax the rich" which is what I hear most. But, yes, the rich do have some nice "loopholes", like donations.

Warren Buffet likes to brag he pays less taxes than his secretary. Probably true.

Buffet's corporation, Berkshire Hathaway, doesn't pay dividends. No dividends, no tax. He only pays capital gains when stock is sold. His personal income is somewhat modest.

One of his favorite ploys is to buy a whole life insurance policy insuring himself for one million dollars. His cost to buy that policy is $187K. He donates ithat policy to a charity, and can then deduct the FULL million dollars from his personal taxes. A very nice offset.

As stated, that's not true. The deduction is the basis or FMV, whichever is less, so cannot exceed the amount paid, which is $187k. There are creative things to do with life insurance, but that's not one of them as you've described it.

What most common people can deduct is mortgage interest. About half of mortgage holders take that deduction.

Which brings us back to some form of graduated, progressive flat tax. Liberals hate that idea. But unless the tax code is a flat tax there is always the possibility of manipulating it to give influential groups a tax break. A RIGID graduated progressive flat tax is the only way to insure against that happening. NO deductions, not even mortgage deductions. NO deduction for state tax payments. Heavy state tax states hate the idea.

People earning between 0-$30K pay maybe 15%. $31-50K maybe 20%. $50-100K maybe 25%. $100-200K maybe 30%. over $200k maybe 35%. NO DEDUCTIONS of any kind. ALL income of ANY kind subject to tax.

It will NEVER happen because politicians will NEVER give up that kind of control over the tax code. It's how they fill the campaign coffers. It would make the IRS almost obsolete. And they would no longer need to collect so much data on how we spend our money.

You want a "fair" tax code? make it impossible to manipulate that code.

I don't know about all liberals, but I'm all for broadening the tax base, which is what you're calling a "flat" tax. Economists love it too - broaden the base, lower the rates, eliminate a bunch of subsidies in the process, make the tax and economic system more equitable and efficient.

TBH, the vast majority of the gains in such a system is just to eliminate the preference for capital gains and dividends. That also makes the tax code FAR, FAR simpler across the board. I've read something like 70% of the operational complexity is dealing with capital gains versus ordinary income. I'm not sure if that's right, but for a few years after TRA 86 eliminated capital gains preferences, tax accountants got to forget/ignore a helluva lot of stuff we learned in school....

Gator · Jul 22, 2020

Regarding spending on luxury items: the top 5 percent of income earners accounts for about one-third of spending, and the top 20 percent accounts for close to 60 percent of spending

The decline in the sale of luxury goods is one reason for the slow recovery of the 2008 recession

JasperL · Jul 22, 2020

cpwill said:
:shrug: good for them?

Sure, but it's not for the rest of us....

If you want to pay more in taxes so Jeff Bezos and his family can live like kings could only dream of in their day for the next few centuries not paying taxes at all, that's fine, but it's not something the rest of us will agree to. And I've never seen an economic argument for it that isn't nonsense, and the social implications are worse. It's one thing for guys like Buffett or Bezos to wield the kind of economic and therefore political power they do, because they earned the wealth, but having their generally worthless, spoiled kids assume that kind of unearned power is a recipe for disaster. We see it in the WH as we speak.

JasperL · Jul 22, 2020

Peter said:
You can get around the problem of the tax hitting the poor so much by exempting things like food and clothes.

Yes, but that's a huge part of consumption, so you'd need far higher rates. And this might not be a 'liberal' attitude, but there is nothing IMO wrong with everyone including the poor funding the government we all benefit from having. It's about balance, and where the spending goes matters a great deal. Using VATs in Europe to fund UHC isn't a bad thing for people with guaranteed healthcare.

rickc · Jul 22, 2020

Absolutely No

A consumption tax is a regressive tax. Those who spend the majority of their income just making ends meet would pay the majority of the taxes. It is a sick idea proposed by the wealthy.

Now a flat tax could be put together that would work. Here is my proposal.

Tax rate controlled by the federal budget. Whatever rate it takes to balance the federal budget. If our representatives cut spending you get a tax cut.

All payroll taxes are eliminated. SS and medicare are paid out of the general fund. No witholding. Every quarter every American sits down and writes a check to the federal government. Everyone sees what our representatives are costing them. Now we never see that money so it is just ignored.

First $35,000 is untaxed for everyone.

All income earned and unearned are taxed at the same rate.

Simple formula same tax for everyone on everything at the same rate. No deductions no exemptions no loopholes.

Waddy · Jul 23, 2020

JasperL said:
That's generally not true. In most states, raw materials aren't taxed nor are wholesale goods. The only taxed sale is the final one to the consumer. There is final 'consumption' by businesses - such as for computers, printers, office furniture, some machinery depending on the state - and that adds to the cost of goods sold to us indirectly, but the sales tax isn't levied but once per life cycle (in general).

They pay a big share of federal income taxes, but nowhere near the majority of all taxes, including sales, payroll, property, etc.

VAT tax = retail sales tax = FAIR tax. They all tax the same thing. I agree mostly, but the argument for VATs and other consumption taxes is it makes a certain 'fairness' sense to tax the poor and middle class for social benefits like (in every country but the U.S.) universal healthcare, and other social spending.

That's one reason luxury taxes don't work. The other is mostly that there's not a big enough base to raise the needed money. For every Ferrari, there are maybe 10,000 Fords sold....

Taxes are paid all along the supply chain. Every company that handles materials all along the way pays taxes. And they often pay government royalties for the actual raw materials on top of taxes.

PirateMk1 · Jul 23, 2020

Waddy said:
Taxes are paid all along the supply chain. Every company that handles materials all along the way pays taxes. And they often pay government royalties for the actual raw materials on top of taxes.

Transaction tax would work better and hit those who move the most money more. Tax the flow of money rather than the pool. 2+ trillion dollars a day move in this country. Taxed at a 1% will cover what the feds need and then some and 1% is small enough that it will be more expensive trying to avoid paying the tax when moving large sums than to simply pay the tax out right. Smaller sums up to a few thousand will be able to evade the tax some what but it will be rather inconvenient for an inconsequential sum.

cpwill · Jul 23, 2020

JasperL said:
Sure, but it's not for the rest of us.

:shrug: I see no particular reason why it harms me if someone lives on less than they bring in over their entire life, and teaches their children to do the same, when the result that their family becomes wealthy. Nor does it harm me if they are wealthy when they begin that process.

If you want to pay more in taxes so Jeff Bezos and his family can live like kings

.... Except generally, no, I won't be.

It's one thing for guys like Buffett or Bezos to wield the kind of economic and therefore political power they do, because they earned the wealth, but having their generally worthless, spoiled kids assume that kind of unearned power is a recipe for disaster.

For them, maybe. "Worthless" heirs who waste their wealth away then don't have it. We are sort of doing that on a national scale, but, if people want to do the reverse on an individual level, good for them.

JasperL · Jul 23, 2020

cpwill said:
:shrug: I see no particular reason why it harms me if someone lives on less than they bring in over their entire life, and teaches their children to do the same, when the result that their family becomes wealthy. Nor does it harm me if they are wealthy when they begin that process.

I see no particular reason, when the top 1/10th of 1% hasn't ever in world history claimed a bigger share of world wealth, to shift more to that top sliver, and then entrench them at the top for generations. If you'd like to explain why the biggest problem we have with the economy right now is the wealthy aren't wealthy enough, take a shot. My own view is the problem is wage stagnation on the bottom half or more, which reduces demand and sustainable growth. There's plenty of investment capital out there, which is why every rich guy on the planet chases equities and bonds and land in a series of inflationary bubbles versus invests in products. If we had demand, which comes from real wage growth, the market meets it. And you'd increase real wages and demand by giving massive tax cuts to Bezos, then to his spoiled wealthy kids. How's that work?

.... Except generally, no, I won't be.

Well, if you cut taxes to roughly zero on the wealthy, a lot of someones are going to be paying a lot more in taxes. If not you then who would you like to raise taxes on so Bezos, and the next 8 generations of that family, don't have to pay any?

For them, maybe. "Worthless" heirs who waste their wealth away then don't have it. We are sort of doing that on a national scale, but, if people want to do the reverse on an individual level, good for them.

I don't care about them. Wealth = power, massive amounts of it, and there's no reason to design a system to maximize what is effectively an aristocracy, plutocracy. The founders would have been aghast at such a proposal. If you think we are best served by an aristocracy then your plan would work fantastically for that.

But the bottom line is you'll need to explain why shifting ENTIRELY to regressive consumption taxes is such an economic winner. I don't see it and I've read the literature I can find on it. The only papers I've seen is a bunch of garbage IMO that aims to take empirical analyses of marginal gains from a shift of some small sliver of a tax system to consumption taxes and assumes the benefits scale as the shift continues to 100% consumption, which is nonsense. It's the same thing the stupid Laffer curve analyses do. They take what's legitimate from maybe 100% rates to 80% rates and then conclude the same effects are seen from 30% to 20%, which is nonsense. Laffer and his idiot colleagues believed it worked at the state level at rates less than 10%, and it doesn't.

PirateMk1 · Jul 23, 2020

JasperL said:
I see no particular reason, when the top 1/10th of 1% hasn't ever in world history claimed a bigger share of world wealth, to shift more to that top sliver, and then entrench them at the top for generations. If you'd like to explain why the biggest problem we have with the economy right now is the wealthy aren't wealthy enough, take a shot. My own view is the problem is wage stagnation on the bottom half or more, which reduces demand and sustainable growth. There's plenty of investment capital out there, which is why every rich guy on the planet chases equities and bonds and land in a series of inflationary bubbles versus invests in products. If we had demand, which comes from real wage growth, the market meets it. And you'd increase real wages and demand by giving massive tax cuts to Bezos, then to his spoiled wealthy kids. How's that work?

Well, if you cut taxes to roughly zero on the wealthy, a lot of someones are going to be paying a lot more in taxes. If not you then who would you like to raise taxes on so Bezos, and the next 8 generations of that family, don't have to pay any?

I don't care about them. Wealth = power, massive amounts of it, and there's no reason to design a system to maximize what is effectively an aristocracy, plutocracy. The founders would have been aghast at such a proposal. If you think we are best served by an aristocracy then your plan would work fantastically for that.

But the bottom line is you'll need to explain why shifting ENTIRELY to regressive consumption taxes is such an economic winner. I don't see it and I've read the literature I can find on it. The only papers I've seen is a bunch of garbage IMO that aims to take empirical analyses of marginal gains from a shift of some small sliver of a tax system to consumption taxes and assumes the benefits scale as the shift continues to 100% consumption, which is nonsense. It's the same thing the stupid Laffer curve analyses do. They take what's legitimate from maybe 100% rates to 80% rates and then conclude the same effects are seen from 30% to 20%, which is nonsense. Laffer and his idiot colleagues believed it worked at the state level at rates less than 10%, and it doesn't.

You want to tax the rich to were they cant really escape it then do a transaction tax at .5% to 1% and eliminate most of the rest of the taxes and fees. It too expensive for them to avoid the tax and people on the low end of the spectrum still get taxed but can avoid some of it. It gets harder to avoid the more money that is dealt with. 2+ trillion a day is moved in this country. Instead of taxing the pool of money we tax the flow. The more it flows the more the government takes in. Thereby incentivizing government to make decision conducive to making the money flow. Its fair and naturally progressive. Not mention much cheaper to collect.

JasperL · Jul 23, 2020

PirateMk1 said:
You want to tax the rich to were they cant really escape it then do a transaction tax at .5% to 1% and eliminate most of the rest of the taxes and fees. It too expensive for them to avoid the tax and people on the low end of the spectrum still get taxed but can avoid some of it. It gets harder to avoid the more money that is dealt with. 2+ trillion a day is moved in this country. Instead of taxing the pool of money we tax the flow. The more it flows the more the government takes in. Thereby incentivizing government to make decision conducive to making the money flow. Its fair and naturally progressive. Not mention much cheaper to collect.

I certainly agree with the idea of a transactions tax on financial instruments. The arguments against it aren't persuasive to me, but of course the effects depend on the amount and what you're suggesting might be a bit high. That part is debatable at least IMO.

PirateMk1 · Jul 23, 2020

JasperL said:
I certainly agree with the idea of a transactions tax on financial instruments. The arguments against it aren't persuasive to me, but of course the effects depend on the amount and what you're suggesting might be a bit high. That part is debatable at least IMO.

All transactions, not just financial instruments. If too much, lower the tax. But we tax all transactions a small amount such it costs more to avoid the tax especially with larger sums. The SEC already has a .056 percent transaction fee for equity transactions. Keep it simple.

molten_dragon · Jul 24, 2020

Meh. There's nothing inherently better or worse about taxing consumption instead of income. Either could be done fairly or unfairly. Either could be done progressively or regressively.

Personally I favor a flat income tax with a single cost of living deduction on all sources of income, but a lot of the sales tax proposals I've seen would be better than what we have now. At least at first until 50,000 loopholes and exceptions were written in.

JasperL · Jul 24, 2020

Waddy said:
Taxes are paid all along the supply chain. Every company that handles materials all along the way pays taxes. And they often pay government royalties for the actual raw materials on top of taxes.

"Taxes" is non-specific. Sales taxes aren't paid by wholesalers, sales taxes are not paid on inputs to manufacturing, a baker doesn't pay sales tax on flour, but charges it on cakes. Etc.

Waddy · Jul 24, 2020

JasperL said:
"Taxes" is non-specific. Sales taxes aren't paid by wholesalers, sales taxes are not paid on inputs to manufacturing, a baker doesn't pay sales tax on flour, but charges it on cakes. Etc.

Yet they all do pay taxes. Every company pays taxes; property tax, payroll tax, licensing taxes, tax on profits, highway taxes for shippers, fees, all kinds of different taxes. They then pass those taxes along and finally the end consumer pays ALL those taxes in the price of the product, and a sales tax on top of that. And if it's property, like a vehicle, property tax added to that.

So goods get taxed all along the supply chain, not just the sales tax when the consumer buys the product. But All along the way. At every step.

Torus34 · Jul 24, 2020

"There exists in modern democracies a group of citizens with excess, [that is, taxable,] money but not enough money to stay its extraction through the purchase of legislation or the rental of legislators. This group is the natural prey of politicians." A Beginner's Guide to Government. Aloysius Goldpen. Chelm Press, 2011, Gotham, GA.

'Nuf said.

cpwill · Jul 25, 2020

JasperL said:
I see no particular reason… to shift more to that top sliver, and then entrench them at the top for generations. If you'd like to explain why the biggest problem we have with the economy right now is the wealthy aren't wealthy enough, take a shot.

:shrug: I don't think it's a problem. I also don't think it's a problem if they get more. No one is proposing "shifting" a larger share to them, however. If you come across the argument that the government needs to start taxing low and middle income classes to give to the wealthy, you'll find me opposing it (that, for example, is one of the reasons I think our current Social Security structure deeply flawed).

My own view is the problem is wage stagnation on the bottom half or more, which reduces demand and sustainable growth.

My focus is on helping those as well, which is why I wonder at those who claim to be focused on them, but who spend so much time instead worrying about and focusing on the wealthy. It is like dealing with a coach who swears he wants to spend this season helping the slower runners to make them better, but who actually spends all his time talking about how we need to hinder the fast ones.

And you'd increase real wages and demand by giving massive tax cuts to Bezos, then to his spoiled wealthy kids. How's that work?

I think we would increase take home pay by ceasing to tax payroll and income (which we would), and increase standards of living (that takehome pay v the cost of living) by having a simple single tax structure in place over the current system which costs us hundreds of billions in compliance costs and distorts our system in unhealthy ways.

You complain about the wealthy not investing as much as you would like into things like new product lines, expansion, or R&D. Well, one of the reasons that they do so less than you might like is because all those activities are taxed in a wide variety of ways (and not just through the federal tax code). Under a Fair Tax model (and, again, I'm not an advocate of shifting to one unless you can figure out the problem of the lost revenue during the transition), those activities wouldn't be taxed - incentivizing the wealthy to do exactly what you want them to.

But, again, I'm not terribly concerned about their income (though I am concerned, as you are, that they maintain trust in our system and the desire to keep their wealth in it, instead of leaving), I'm mostly concerned with removing the obstacles that hinder those in the lower income strata from doing well for themselves.

Well, if you cut taxes to roughly zero on the wealthy, a lot of someones are going to be paying a lot more in taxes. If not you then who would you like to raise taxes on so Bezos, and the next 8 generations of that family, don't have to pay any?

That is hyperbolic - this measure does not advocate cutting billionaire's taxes to zero or, in fact, cutting them at all. Instead, their taxes (like everyone else) would be determined by what they consume.

Some people will pay more in taxes under a Fair Tax system. Specifically, tourists and other visitors to our shores will now pay taxes, along with illegal labor, who currently does not.

You know how the "Legalize Everyone" advocates are always pointing out that, if we just allowed illegal aliens to legally work, they could pay taxes, shoring up our finances? Well, here, they would. Huzzah.

I don't care about them. Wealth = power, massive amounts of it, and there's no reason to design a system to maximize what is effectively an aristocracy, plutocracy

That would require consistent state intervention to protect entrenched financial interests from competition. :shrug: I concur that we should not have an interventionist government that seeks to steer economic results.

But the bottom line is you'll need to explain why shifting ENTIRELY to regressive consumption taxes is such an economic winner.

A massively simpler and more transparent tax system would save the economy hundreds of billions a year. :shrug: Especially when it's compounded, that's a pretty nice immediate booster.

Additionally, we would cease dis-incentivizing work and savings, meaning we would get more of both, which would be fantastic both for our short and our long term financial health.

JasperL · Jul 25, 2020

cpwill said:
:shrug: I don't think it's a problem. I also don't think it's a problem if they get more. No one is proposing "shifting" a larger share to them, however.

Consumption taxes are objectively regressive. You know what that means... You'd eliminate the progressive income and estate taxes for a regressive consumption based tax.

My focus is on helping those as well, which is why I wonder at those who claim to be focused on them, but who spend so much time instead worrying about and focusing on the wealthy.

OK, so I clicked on the second one which is a negative income tax paired with a "flat" income tax of 20%. That's entirely different than consumption taxes. I'm not sure what you're for if you're for two entirely different systems.

I think we would increase take home pay by ceasing to tax payroll and income (which we would), and increase standards of living (that takehome pay v the cost of living) by having a simple single tax structure in place over the current system which costs us hundreds of billions in compliance costs and distorts our system in unhealthy ways.

OK, assuming you're talking about a flat INCOME tax here - since that's your proposal - I'm all for flattening the tax base. We tried that in 1986 and it lasted a couple of years, and what we accomplished was to jam rates down, the complexity came back, and here we are.

And if you want to exempt investment income, which you've suggested, then you leave in about 70% or more of the complexity, as rich guys do like they do now and go to extraordinary lengths to convert ordinary income to capital gains income.

You complain about the wealthy not investing as much as you would like into things like new product lines, expansion, or R&D. Well, one of the reasons that they do so less than you might like is because all those activities are taxed in a wide variety of ways (and not just through the federal tax code).

What's the evidence the tax code hinders that investment? People invest when there is demand for products. That's why we got plenty of investment when marginal tax rates were at 90% or more post WWII, corporate tax rates at 50%, and why in the 2000s, we got bubble investing into dog crap financial products with rates at a fraction of those. Too much money with nowhere productive to go, because existing investments met consumer demand....

But, again, I'm not terribly concerned about their income (though I am concerned, as you are, that they maintain trust in our system and the desire to keep their wealth in it, instead of leaving), I'm mostly concerned with removing the obstacles that hinder those in the lower income strata from doing well for themselves.

We all want that but I don't believe regressive consumption taxes get us there. It's a MASSIVE tax cut for the wealthy. Someone's taxes make up for that.

That is hyperbolic - this measure does not advocate cutting billionaire's taxes to zero or, in fact, cutting them at all. Instead, their taxes (like everyone else) would be determined by what they consume.

Consumption as a share of income varies from over 100% for the poor to a small fraction of annual income for the ultra rich. It's always fascinating that every tax proposal cuts taxes on the donor class, to help the poor of course!

Some people will pay more in taxes under a Fair Tax system. Specifically, tourists and other visitors to our shores will now pay taxes, along with illegal labor, who currently does not.

That's not enough to make up the distributional changes.

You know how the "Legalize Everyone" advocates are always pointing out that, if we just allowed illegal aliens to legally work, they could pay taxes, shoring up our finances? Well, here, they would. Huzzah.

Lots of them already pay taxes, either on TINs issued by IRS for undocumented workers or on a stolen SSN. More work for poverty wages and would pay no tax under our system, with EITC and other social spending taking care of most payroll taxes.

A massively simpler and more transparent tax system would save the economy hundreds of billions a year. :shrug: Especially when it's compounded, that's a pretty nice immediate booster.

Additionally, we would cease dis-incentivizing work and savings, meaning we would get more of both....

Yeah, theory is great. See, Laffer curve. Unfortunately reality gets in the way, and those gains never materialize. And you're arguing for in one thread a flat income tax, and then for a consumption tax, so I'm not sure what you want.

ludin · Jul 27, 2020

JasperL said:
That's generally not true. In most states, raw materials aren't taxed nor are wholesale goods. The only taxed sale is the final one to the consumer. There is final 'consumption' by businesses - such as for computers, printers, office furniture, some machinery depending on the state - and that adds to the cost of goods sold to us indirectly, but the sales tax isn't levied but once per life cycle (in general).

The only way you are not taxed is if you have a tax exemption that you are going to collect tax on the other end of the sale. There are mark up through the supply chain process and sometimes those include taxes.
it is a bit convoluted.

They pay a big share of federal income taxes, but nowhere near the majority of all taxes, including sales, payroll, property, etc.

The top 1% pay about 37% of all income taxes.
the top 10% pay about 52%.

VAT tax = retail sales tax = FAIR tax. They all tax the same thing. I agree mostly, but the argument for VATs and other consumption taxes is it makes a certain 'fairness' sense to tax the poor and middle class for social benefits like (in every country but the U.S.) universal healthcare, and other social spending.

No they are not all the same thing in fact they are completely different.

A VAT tax is like in europe. They charge a federal income tax and the vat tax is on top of it.
this is on top of any local sales taxes as well.

the FAIR tax is completely different. yes it is a national sales tax but it eliminates the federal income tax competely. It also eliminates payroll taxes as well.
Also a family only pays sales tax on anything above the poverty level for their family size.

Also the tax only applies to new items. It doesn't affect used items which most lower income people already purchase.
SO if you buy a used car you don't pay the tax. if you buy a new car you would.

If you buy a old home you pay no sales tax if you buy a new home you would.
It also gets rid of supply chain taxes that add to the cost.

That's one reason luxury taxes don't work. The other is mostly that there's not a big enough base to raise the needed money. For every Ferrari, there are maybe 10,000 Fords sold....[/QUOTE]

Should we tax consumption instead of income and investment?

Anti-Hypocrite