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Consumption Tax
Yar
Registered User regular
Registered User regular
The bill has been on the floor for years, in the Senate I think.i dont mean to derail, but would you mind just explaining how that could work for consumption taxes? one quick post, then we'll put it to rest, i promise. im just intensely interested.
1.) No more IRS. No estate, corporate, capital gains, income tax.
2.) A federal sales tax of somewhere around 30%, collected and managed pretty much the same way state and local sales tax is currently handled.
3.) A monthly credit everyone gets on a debit card that is equal to the average expenditures in your county/state for someone who makes $X (poverty level or whatever). If you don't even make enough to spend that much, then this is a net plus.
It's a revenue neutral plan, so the government is taking the same amount out of the ecomony.
People argue that taxing consumption would kill the economy, but you have to realize that the extra income everyone would have, plus the reduced cost of doing business, would actually make consumption equally, or likely more, affordable than before (the "more" comes in when businesses move jobs back into the US, adding more jobs, and corporations significantly reduce their overhead in trying to understand, predict, and manage their tax liabilities, reducing the cost to produce). Also consumption is historically much more stable than income, so revenue would fluctuate less.
People also contend that it is highly regressive, because the wealthier you are the less you spend on consumption. This gets into a deeper discussion on the value of that money to the economy as investment capital creating jobs and such, but regardless, some plans include a small but highly progressive income or capital gains tax to keep the wealth envy in check.
And the current tax disincentivizes working, which overall is much less resistant to incentives and much more unstable. That's a big part of the point. The money has to come out somewhere, better in consumption than in production.but you are also disincentivising spending at the same time. You're conveniently ignoring that fact.
If such a tax rolled out, likely people would go out on a significant spending increase right before it hit, sending the economy unnaturally into the black, and then after it hit that would trail off, long enough for companies to figure out the huge benefits of having no corporate taxes and also firing all of their highest paid lawyers, and in order to get themselves out of the spending dip, start cutting prices like crazy (which they can afford to do while maintaining profits), until everyone realizes that they have more money and prices are now not nearly as higher as they thought they would be, which should prompt them to quickly return to what they love doing, buying big TVs.
Businesses will lay people off at the slightest hint of a downturn and won't hire them back until well after the ensuing recovery. That's why taxing employment sucks. On the other hand, people want that new TV really bad and will only hold off on buying it if they really can't afford it, and will buy it the second they can afford it again.
Also the tax gets spread across everyone and across a broader span of their lives, not just income earners during their working years.
Yar on
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We are not convinced.
A balance of taxes is good, higher sales (consumption) tax and lowing and simplifying other taxes would be a good thing.
What would you do about the second hand market?
What would you do about people buying abroad? This would create a nightmare for customs...
but they're listening to every word I say
My main concern would actually be the logistics of the switchover and the possibility that it would create new niches that would rapidly be exploited, but you addressed that a bit in your post.
Because we have to have a certain amount of tax dollars to build roads and schools and shit and taxing people who can afford to pay works better than taxing people who can't.
Also, every single person having a single specific kind of huge, predictable debit card on hand would result in horrible crime shit.
Yeah, I never understood the desire to put all our governmental revenue eggs in one basket, or the taxation burden to be borne on one sector's back. What we have right now is beyond horrible, I'll grant you, and needs to be reformed and simplified; I just don't think this is the best means of doing it.
Though I do wish we would switch from our current sales tax system to the European VAT system so that the price on the shelf is the actual price you're charged. Not that plus 8-10% depending on where you're shopping. It'd just make adding up the cost of a cart full of crap that much easier.
That's a retarded scheme though. I don't use roads/schools/etc more than the guy who is 1 tax bracket lower than I am.
Your wealth does not exist in a vacuum.
The marginal value is less of an impact ...and because you can afford to.
Well, a high consumption tax is a basic part of the "green shift" the liberal and green parties of Canada want (but they aren't in power).
You just make the consumption tax on things that fuck the environment higher than the average consumption tax, so you can tackle more than one issue at once.
Of course, no one here (canadian gov) was suggesting abolishing other taxes, they were just going to be lowered a few percentage points and poor people would get credit/checkes as yar suggested.
...what poor tax rate?
You do benefit more from them, though. Your ability to create wealth is based upon the infrastructures put in place by society (transporation, education, law enforcement, etc.). The more money you make, the more benefit you receive and/or received from these structures. Thus, it stands to reason that you will pay more taxes.
Or in other words, wealth creation and the allocation of that wealth is more complicated than "I eat what I kill." The wealthy wouldn't be able to make any money at all without an educated, healthy, relatively mobile workforce.
Edit: Beat'd
I'm assuming that such a system would be well-thought out and take the complexity of the economy—and the inevitability of loopholes and exploitation—into account. (It would also be nice to figure out what exactly to do with the IRS employees, since it would kind of suck to just fire them all.)
You likely benefit from them more than him due to your wealth coming from exploiting the labour of those more numerous people in lower tax brackets.
Someone who is upper management at UPS gets a hell of a lot of $$ from having a comprehensive multi-modal transportation infrastructure that is extremely subsidized by the Federal Government (80-90%) considering that nearly his entire paycheck is dependent on the ability of their trucks to use it effectively in order to deliver parcels. For instance.
If the fraction remains constant then this is all meaningless to begin with. You would also have consumers dealing with larger spikes in their income than usual, making it more difficult to judge, unless you presume to fold sales taxes and such into the prices of goods instead of after a sale.
The one you would have to implement to pacify the god damn liberals who would say that a consumption tax is incredibly regressive if progressive rates aren't implemented into it?
They would be retained under a new organization devoted to dealing with this absurdly complex new tax plan.
"Man, this new tax code is going to be so simple WE CAN GET RID OF THE IRS!!!!!"
Yeaaaaaah no.
There is no magical X% tax rate you can apply to the entire economy that will be simple, enforceable, and functional. You need to cover what counts as consumption, what doesn't, when can you get double-taxed, when can't you, who collects the tax, who doesn't, what enforcement mechanisms ensure the taxes are properly collected, who issues the magical progressive debit cards to all the poor folks, who verifies their addresses, who verifies their identities, who searches for fraud, who handles disputes on the cards, etc. etc. etc.
If someone wants to argue the merits of a consumption tax on some other level they are welcome to, "it magically simplifies everything NO MORE IRS WE SAVE BILLIONS!" is a load of total horseshit.
For example, my girlfriend's dad pays a relatively high tax rate. This does not prevent him from aggressively seeking out ways to increase his pre-tax income because, even if he's taxed at the top marginal rate, he's still making more money overall. Perhaps this would be an issue if top marginal rates got ridiculous but at where they are now? Hardly.
Basically, I think you'd be looking at a figure much higher than 30% (with things like food being either untaxed or taxed at a lower rate), and a higher value on the debit card. That would work within the parameters of what you have presented and be less regressive.
Yeah, I don't know about that. I'm agnostic about it. I imagine this would be a tradeoff with having less severe periods of unemployment, though.
I was going to comment on the "wealth envy" comment and I'm glad you did here. It's complete bullshit. I totally want to be rich one day, and I don't begrudge those who are. I start to get irritated when they try to avoid paying taxes because, somehow, all of their wealth was somehow a product of their own miraculous intelligence without any outside support by society and the workforce.
Unlike employment, spending can be controlled, ESPECIALLY at the higher end, and without actually limiting personal consumption.
There would have to be absolutely massive taxes on importing items and proving that you paid the tax on them when bringing them into the country.
Though that also might be bullshit, and this may well be a solution in search of a problem. I certainly agree with you re: marginal tax rate ignorance.
Geckhan linked to a report when the last time a whole 'progressive taxation is the devil' tangent came up which showed that there isn't a disincentive even when tax brackets are at what would seem to be ridiculous levels in today's world. Upwards of 80% (which would have been low under Eisenhower) didn't really make people suddenly say 'fuck it' and go home. Which makes sense because economic theories still tend to ignore the status which being an effective CEO or what have you garners in their social circles which behavioral economics is starting to try and take into account as there is no such thing as a rational human being. Though I'd still say that the top tax rate should get capped at 50%, personally. Also, we should have more brackets since $250k may be a lot more than $100k it's nothing compared to $1m, let alone $1b.
Yeah, I'm not denying there would be huge logistical issues.