Should we tax consumption instead of income and investment?

[JasperL]

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.

No, buy cotton for thread, that cotton sale isn't taxed. The sale of thread to a sheet maker isn't taxed. The sales of sheets by the fabric maker to a wholesaler isn't taxed. If that wholesaler sells sheets to best buy, that sale isn't taxed. It's only taxed at the point of sale to the final consumer, which is at Best Buy. The exemption doesn't mean the person getting it on the purchase has to charge on the sale. That might be generally true, but it's often not.

There are some costs in that process that are taxed. Machinery to make sheets might be taxed, depending on the state, the machinery, etc. but that sale of machinery to the sheet maker is the final sale, and that machinery is consumed by the manufacturer.

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 VAT functions like a sales tax, and is a tax on final consumption. The mechanics are different and it does a BETTER job of excluding inputs and business transactions, but it's just a sales tax by a different name in who pays it and on what. And there are no "local" sales taxes in countries that charge VAT. There is a local VAT.

It would be quite easy (in theory) to design a sales tax and VAT that collect identical amounts from the same final consumer.

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.

OK, those are differences, but as you say up front - "yes it is a national sales tax." That's right - it's a national sales tax and this tax has different exemptions, etc. than existing sales taxes, but it's a sales tax.

 

[ludin]

No, buy cotton for thread, that cotton sale isn't taxed. The sale of thread to a sheet maker isn't taxed. The sales of sheets by the fabric maker to a wholesaler isn't taxed. If that wholesaler sells sheets to best buy, that sale isn't taxed. It's only taxed at the point of sale to the final consumer, which is at Best Buy. The exemption doesn't mean the person getting it on the purchase has to charge on the sale. That might be generally true, but it's often not.

There are some costs in that process that are taxed. Machinery to make sheets might be taxed, depending on the state, the machinery, etc. but that sale of machinery to the sheet maker is the final sale, and that machinery is consumed by the manufacturer.

again you have to check with your local government in and sometimes multi-state governments. as each state operates differently.

The VAT functions like a sales tax, and is a tax on final consumption. The mechanics are different and it does a BETTER job of excluding inputs and business transactions, but it's just a sales tax by a different name in who pays it and on what. And there are no "local" sales taxes in countries that charge VAT. There is a local VAT.

It would be quite easy (in theory) to design a sales tax and VAT that collect identical amounts from the same final consumer.
OK, those are differences, but as you say up front - "yes it is a national sales tax." That's right - it's a national sales tax and this tax has different exemptions, etc. than existing sales taxes, but it's a sales tax.

YOu missed the point you called them all the same they are not all the same and they operate differently
hence why i pointed it out.

 

[JasperL]

again you have to check with your local government in and sometimes multi-state governments. as each state operates differently.

That's how sales taxes work in all states that have them. Inputs are exempt, and it's not because you agree to charge sales tax on the next sale. That might or might not happen.

YOu missed the point you called them all the same they are not all the same and they operate differently
hence why i pointed it out.

They tax the same thing - consumption. Countries choose a VAT or RST based on administrative concerns, the mechanics and record keeping, etc. but not on what they want to tax and who should pay it.

And retail sales tax regimes are not the same, and operate differently, depending on the state. Some tax food. Others don't, for example. Some states tax a bunch of services, other states tax few or no services. But they're still RSTs.

 

[Tahuyaman]

The income tax should be abolished. Production should never be taxed.

 

[jcgriff2]

The debate over whether taxes should be raised or lowered is a contentious one in the political realm. The argument in favor of lowering taxes states that rich people, who pay the most taxes, are hindered from properly investing in businesses that would increase the general welfare of the public. The counterargument is that rich people end up pocketing most of those benefits while tax cuts come at the expense of public services meant for the lower and middle classes. Assuming the counterargument, it's worth asking the question what do rich people spend their additional revenue on. Conservatives and libertarians argue that rich people will spend it on investment, pouring money into businesses and creating jobs. Progressives and socialists argue that they pocket the revenue and use it to buy an additional mansion or a private yacht.

Recently, I began wondering, maybe we should tax consumption rather than income or

The downside of a neutral consumption tax (i.e. a sales tax) is that it ends up being regressive. You see, people lower on the economic totem pole end up spending a higher percentage of their income while wealthy people are more likely to put income into investment. For this reason, I would propose the tax to be levied on luxury goods (goods that go up in demand more than proportionally to income) and/or nonessential goods. It might also be a good idea to tax people for buying a third home (those buying a second home may simply be transitioning to another area and intend on selling the first home). It might also help deter home speculation.

If implemented properly, rich people will be taxed for buying a mansion or a Ferrari but not for selling stocks, saving money, or donating to charity. This might help bring about the best of both worlds in which conservatives don't have to worry about taxes slowing down economic growth while progressives can rest easy, knowing that the wealthy are paying their fair share.

No - do not screw with current federal, state and local income taxes and/or sales & use tax.

Many countries that have gone to this method (high "VAT" [Value Added Tax, i.e. sales & use tax] and at first lower income taxes for the offset) have ended up with both being higher than when they started.

In general, state, local, mass transit, hospital district, and just about anything else you care to percentage-tax, end up collecting much more than state and local income taxes do and not always necessarily from out-of-towners, either. Imagine paying 40% VAT on a new car purchase! Or some other high value good.

Also, currently 7 states do not tax income; soon to be 9 states. This is one reason why retirees love Florida and Texas.

Sales and Use taxes are constantly increasing as states are allowing more and more counties and cities and others to asses S&U taxes. Counties and cities may only be 1/4% - 4%, but if those get cut in favor of local income tax, you'll really see overall taxes increase.

 

[cpwill]

Firstly, please accept my apologies for the delay. Life got… busy for a bit

Consumption taxes are objectively regressive.

They certainly have the potential to be (though the number of high-income folks who manage to spend as much or more than they make is downright depressing), and are likely to be if flatly applied, certainly. That is why the Fair Tax includes a Prebate – a UBI like payment that offsets federal taxes up to the poverty line, making the net effect progressive again.

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 either system would be better than the current destructive, nightmarish, writhing mass of undecipherable regulatory bantha dung that we have now. The Perfectly Progressive/Negative Income Tax is simply my personal proposal.

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.

Yes – it is indeed impressive the degree to which tax incentives can drive behavior, which is what puzzles me about the very next thing you write:

What's the evidence the tax code hinders that investment?

The fact that gains on it are taxed – in some cases heavily, in others less so – through multiple system whose complexity and overlapping requirements necessitates extra expenditures just to try to remain within what your hired accountants can best figure the law is.

I have a relative who is a “small business owner” (though he’s grown quite a bit) and who owns a company involved in the construction industry. A couple of years ago, he wanted to invest in expanding his business by consolidating then-disaggregated operations into a single, updated facility with plenty of space and better equipment.

Think for a second about the costs imposed by government associated with that kind of a move – not just the forest of bureaucratic costs and red tape imposed in attempting to buy land and build on it, but all the taxes involved in the expanded payroll, income, property, federal, state, and municipal…. And then remember that he’s on the hook for that regardless of whether he makes a profit or not on this move.

If the wager is “Tails You Lose $100, Heads You Win $70”, there is a rational degree to which that has disincentivized the investment, meaning you will get less of it than if it were a simple Lose or Gain the hundred bucks.

People invest when there is demand for products.

On the contrary – people invest when they have (or have access to) excess supply, and believe that a particular investment is the best option for them – a decision that can be heavily impacted by their perception of likely future demand, but which is not a sole product of it.

We all want that

I don’t know if we do. I think, for most, helping the poor by removing obstacles in their way comes a distinct (and sometimes distant) second to demagoguing the Other Side for political benefit.

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!

:shrug: while in my own proposal I was willing to fold in capital gains taxes to get bipartisan buy-in (though, full-disclosure: I think it's a harmful idea), increasing the dynamism, growth, and opportunity within an economy is, historically, the best way to actually help the poor. The notion that is out there that somehow the poor are harmed because others are able to create better ways to serve the public and profit from it is balderdash.

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

Not during COVID, certainly. But, then, taking a look at this fiscal year, setting long term policy based on short term emergency conditions doesn’t seem terribly wise.

 

[cpwill]

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.

“Lots” is a fun word that means “more than one and not quite sure how many”. This captures all of them who do retail-level purchasing in the United States, which seems a pretty good analog to “all of them”.

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.

Again, I would take either as a better alternative to what we have (though I want to see how the FT people are going to cover for the year’s-worth of lost revenue first).

However, nothing in what you said actually counters the seemingly self-evident point that massively simpler and more transparent tax system would save the economy hundreds of billions a year, which, when compounded, would be a pretty nice boost, or that increasing the returns for labor and savings makes it likely we would get more of both.

 

[JasperL]

That is why the Fair Tax includes....

That's the theory, UBI to overcome the inherently regressive nature of consumption taxes, but the FAIR tax is deader than dead so I'll leave it there.

I think either system would be better than the current destructive, nightmarish, writhing mass of undecipherable regulatory bantha dung that we have now. The Perfectly Progressive/Negative Income Tax is simply my personal proposal.

The truth is income taxes are hard mostly because business is complex. It has nothing to do with rates, and little in practice to do with the loopholes. Partnerships are in practice the hardest area of tax, or can be, and there's no tax due with those returns.

Yes – it is indeed impressive the degree to which tax incentives can drive behavior, which is what puzzles me about the very next thing you write:

The fact that gains on it are taxed – in some cases heavily, in others less so – through multiple system whose complexity and overlapping requirements necessitates extra expenditures just to try to remain within what your hired accountants can best figure the law is.

I'm not sure if you understood my point. Every "flat tax" proposal I've seen, actual laws, or proposals that go beyond the napkin sketch stage, exempts investment income like capital gains. So why would you favor a "flat tax" that keeps what makes the current system so complex, which is the huge difference between "ordinary" income and "capital gains."

I have a relative who is a “small business owner” (though he’s grown quite a bit) and who owns a company involved in the construction industry. A couple of years ago, he wanted to invest in expanding his business by consolidating then-disaggregated operations into a single, updated facility with plenty of space and better equipment.

Think for a second about the costs imposed by government associated with that kind of a move – not just the forest of bureaucratic costs and red tape imposed in attempting to buy land and build on it, but all the taxes involved in the expanded payroll, income, property, federal, state, and municipal…. And then remember that he’s on the hook for that regardless of whether he makes a profit or not on this move.

I don't understand the issues with that transaction. I don't see a tax issue there, except of course if you hire a new person, yes, you have to pay employment taxes for that new person, consolidated operations or not, and whether you owe payroll taxes is unrelated to your profitability. And he'd owe property taxes on the new place, but not on the old facilities if those are sold, and I assume they would be. But yes, business is complex. No tax system can make consolidating a bunch of operations a simple thing.

If the wager is “Tails You Lose $100, Heads You Win $70”, there is a rational degree to which that has disincentivized the investment, meaning you will get less of it than if it were a simple Lose or Gain the hundred bucks.

Except that's not the bet. If the investment is profitable, it will generate far more in profits than the cost, or no businessman would make the investment. And no income taxes are owed until the investment turns a profit, especially with current rules on depreciation which allow immediate expensing for most new equipment purchases, which is fine.

On the contrary – people invest when they have (or have access to) excess supply, and believe that a particular investment is the best option for them – a decision that can be heavily impacted by their perception of likely future demand, but which is not a sole product of it.

First of all, I asked for evidence, you ignored that request and clipped it because it's hard to find.

The Fortune 500 and our plutocrats are sitting on MASSIVE piles of cash they cannot invest in operations, so they're paying it out as dividends, share buybacks, speculating in land, stocks, etc. Supply side nonsense is nonsense, in the real world, as opposed to in theory.

I don’t know if we do. I think, for most, helping the poor by removing obstacles in their way comes a distinct (and sometimes distant) second to demagoguing the Other Side for political benefit.

Yes, only you have pure motives.... :roll:

while in my own proposal I was willing to fold in capital gains taxes to get bipartisan buy-in (though, full-disclosure: I think it's a harmful idea), increasing the dynamism, growth, and opportunity within an economy is, historically, the best way to actually help the poor. The notion that is out there that somehow the poor are harmed because others are able to create better ways to serve the public and profit from it is balderdash.

Strawman. Empty platitudes. Show me the evidence tax cuts for the investor class trickle down to the poor.

 

[JasperL]

“Lots” is a fun word that means “more than one and not quite sure how many”. This captures all of them who do retail-level purchasing in the United States, which seems a pretty good analog to “all of them”.

The point I thought was pretty obvious - using taxing illegals not taxed under current law as an assumed source of massive funds to finance these tax changes is nonsense. If they were brought into the sunlight for taxes, the impact would be small, because 1) lots of them pay taxes as required, 2) the vast majority would not owe income tax because they work for poverty wages.

And if we legalized them, which was your starting point, they'd get the prebates and cost money. So your idea doesn't make any sense as stated. What I think you meant was we'd not legalize anyone, then impose on them 30% RST on all purchases without prebates, which makes living here more expensive, perhaps lessening the attraction. Just say that. You pretended that system would meet with liberal approval. That would depend on who if anyone was allowed to work here legally.

It's also an unknown what shifting our tax system to visitors would do to a thriving tourist industry if their costs to travel here went up by 30% overnight. So you'd willfully do what you can to kill that industry off, or hurt it severely. Seems like that should be considered in this financing plan, if it's serious.

Again, I would take either as a better alternative to what we have (though I want to see how the FT people are going to cover for the year’s-worth of lost revenue first).

However, nothing in what you said actually counters the seemingly self-evident point that massively simpler and more transparent tax system would save the economy hundreds of billions a year, which, when compounded, would be a pretty nice boost, or that increasing the returns for labor and savings makes it likely we would get more of both.

I'll just say that I don't think tax accountants or tax lawyers have anything to worry about with any simplification scheme I've seen. What they all look like to me in practice are schemes to reduce taxes on the donor class with "simplification" and "economic growth" as the selling point.

Capital gains taxes is the tell for me. Bottom line is MASSIVE complexity is built into the system to distinguish lower taxed (or 0% taxed) capital gains, so any tax "simplification" proposal that leaves them tax advantaged...isn't simplified. Not really. There might be some temporary gains on the margins, but saying - All income taxed at the same rate!!!......except for if you can jam the income into this little box over here that's not taxed EVER!! is not tax simplification.

When TRA 86 came online, we tax accountants got to forget about and ignore a bunch of complicated crap because income was income, all taxed at lower rates. That part of TRA 86 was actually a great idea, and it failed in practice because very soon, we got the capital gains tax preferences back and all that complexity reemerged as critical. Exempt capital gains and the entire tax planning industries that exist today will simply grow to figure out how to get a square peg (ordinary income fully taxed) into that round hole (cap gains taxed at 0%).

 

[cpwill]

UBI to overcome the inherently regressive nature of consumption taxes, but the FAIR tax is deader than dead so I'll leave it there.

Yes, that is how it is progressive, and yes, it is indeed politically pretty dead.

The truth is income taxes are hard mostly because business is complex. It has nothing to do with rates, and little in practice to do with the loopholes. Partnerships are in practice the hardest area of tax, or can be, and there's no tax due with those returns.

An excellent an argument as any for the simplicity of switching to a single national retail sales tax

I'm not sure if you understood my point. Every "flat tax" proposal I've seen, actual laws, or proposals that go beyond the napkin sketch stage, exempts investment income like capital gains.

Sure. They also "exempt" things like parents paying for college for their kids and providing free room and board.

So why would you favor a "flat tax" that keeps what makes the current system so complex, which is the huge difference between "ordinary" income and "capital gains."

In my own proposal I actually stated I was willing to tax capital gains as income in order to achieve bipartisan buy-in.

But, generally, I think it would be an unwise change - we would be better off to have a system that punishes or dis-incentivizes investment as little as possible.

No tax system can make consolidating a bunch of operations a simple thing.

It can reduce the extent to which it adds costs and complexity, and it can increase the extent to which it adds costs and complexity. The former is preferrable.

If the wager is “Tails You Lose $100, Heads You Win $70”, there is a rational degree to which that has disincentivized the investment, meaning you will get less of it than if it were a simple Lose or Gain the hundred bucks.

Except that's not the bet.

That is precisely the bet. If you lose money, you absorb 100% of the losses. If you gain money, you only gain a portion of the winnings. It’s fine to still think that we should be taxing investment activities by taxing business and capital profits, but, we need to admit that doing so comes with unintended consequences that are not – in and of themselves – desirable.

First of all, I asked for evidence, you ignored that request and clipped it because it's hard to find.

Not at all. However:

1. I did not clip it, but responded. See the fourth quote box in post 87.

2. I addressed it here as a matter of logic because it’s fairly simple. That which you add costs to, you get less of than you would otherwise (that is, after all, one of the major impetuses for passing Sin Taxes)

The Fortune 500 and our plutocrats are sitting on MASSIVE piles of cash they cannot invest in operations, so they're paying it out as dividends, share buybacks, speculating in land, stocks, etc.

:shrug: good for them. It’s unfortunate that we disincentivize investment (which is another word for “speculation”) the way we do.

Supply side nonsense is nonsense, in the real world, as opposed to in theory.

On the contrary – you ultimately cannot trade what does not exist.

Yes, only you have pure motives.... :roll:

Oh, plenty of individual people would honestly like to help the poor. But our politicians have no incentive structure encouraging them to do so; it’s easier and more profitable for them to demagogue any attempt to do so for immediate political benefit... and a majority of our populace seems to have turned into Tribalistic fools, eager to reward them for doing so.

Strawman. Empty platitudes. Show me the evidence tax cuts for the investor class trickle down to the poor.

On the contrary – it is the Trickle Down argument that is the strawman. It is, however, sadly not a strawman argument to point out that the claim that increases to wealthy people are to blame for the condition of poor people is a common one.

 

[cpwill]

The point I thought was pretty obvious - using taxing illegals not taxed under current law as an assumed source of massive funds to finance these tax changes is nonsense. If they were brought into the sunlight for taxes, the impact would be small, because 1) lots of them pay taxes as required, 2) the vast majority would not owe income tax because they work for poverty wages.

1. As I stated - "Lots" is a fun word, because it really just means "some".

2. Additionally, you are correct that under the Fair Tax (which is what was under discussion here), they would not pay an income tax. Because there would be no income tax. They would instead pay a national consumption tax at the retail level.

:shrug: you asked who was going to pay more in taxes. Sorry if you don't like the answer.

And if we legalized them, which was your starting point, they'd get the prebates and cost money.

No they wouldn't, as this does not require legalization. If anything, it would reduce identity theft by removing an incentive for it.

So your idea doesn't make any sense as stated. What I think you meant was we'd not legalize anyone, then impose on them 30% RST on all purchases without prebates, which makes living here more expensive, perhaps lessening the attraction.

That is certainly a likely result, however, no, what I said is that - since they wouldn't be paying taxes as individual income earners, but rather as consumers, we would capture the portion of illegal immigrants who actually consume inside the territorial United States, as opposed to the smaller portion who also commit identity theft and tax fraud.

Just say that. You pretended that system would meet with liberal approval.

My own proposal did have some bipartisan support - but, again, here we were discussing the FairTax, which, I think was only ever a conservative phenomenon. You asked who would be picking up an increased tax bill under the FairTax; part of the answer is "People who are visitors to our shores, and illegal immigrants".

That would depend on who if anyone was allowed to work here legally.

No it wouldn't, as illegal immigrants buy food, clothing, household goods, etc.

It's also an unknown what shifting our tax system to visitors would do to a thriving tourist industry if their costs to travel here went up by 30% overnight. So you'd willfully do what you can to kill that industry off, or hurt it severely.

Maybe. You'd be stripping out a lot of embedded tax costs currently in the costs of that industry in return for a single visible charge at the end. You would probably reduce it as a result, but not by as much as you would if it actually drove the cost up 30% overnight.

I'll just say that I don't think tax accountants or tax lawyers have anything to worry about with any simplification scheme I've seen.

I'd agree. Just because it would be good for the country is no reason for our political class to give up the easy ability to demagogue each other and do it

Capital gains taxes is the tell for me

Well, then, respectfully, you are projecting your own assumptions onto others, which isn't a terribly effective means of judging their intent.

Bottom line is MASSIVE complexity is built into the system to distinguish lower taxed (or 0% taxed) capital gains, so any tax "simplification" proposal that leaves them tax advantaged...isn't simplified. Not really. There might be some temporary gains on the margins, but saying - All income taxed at the same rate!!!......except for if you can jam the income into this little box over here that's not taxed EVER!! is not tax simplification.

On the contrary - that would be much simpler than our current system. So would a flat 100% rate. Simply because you do not like the way in which simplification occurs does not make it "not simplification".

 

[SheWolf]

Pre-bate taxation on expenditures up to the poverty line. Then it's progressive. Further, only tax new retail goods, not used goods. Then it's intrinsically progressive.


FairTax - Wikipedia


For me, if someone wants to talk federal consumption/sales tax, they must know the FairTax. That's class 101. It provides the concept names and vocabulary.

I was thinking the same thing. If we are going to tax consumption, exactly what should we tax and what should we not? I would hope that we wouldn’t tax food, because that would increase the price of food and groceries astronomically. If we put the majority of the sales tax on new car sales and new home purchases, then that could really destroy auto and home sales.

This could dramatically change US consumption behavior, and a person like me travels a lot outside the United States. I would try to buy a lot of things outside of the United States in that case.

Then my husband, he imports and exports goods between countries. Import and export taxes are not sales taxes. Companies like my husband’s do not pay sales taxes on items intended for retail. I assume this would end import/export taxes, but not fees associated with import/export, therefore this whole gimmick seems like a giant tax giveaway for corporations. Average people would be paying astronomical sales taxes but corporations would not pay any taxes at all. That is completely insane. I think that United States corporations should pay taxes

 

[SheWolf]

My own proposal did have some bipartisan support - but, again, here we were discussing the FairTax, which, I think was only ever a conservative phenomenon. You asked who would be picking up an increased tax bill under the FairTax; part of the answer is "People who are visitors to our shores, and illegal immigrants". .

Your proposal? You say that like you hold office

 

[cpwill]

Your proposal? You say that like you hold office

I've thought about it, but, nah - I like my current job, and don't like asking for money.

However, what I was referring to was the Perfectly Progressive / Negative Income Tax I linked to earlier in the thread, which is currently discoverable down in the Loft

 

[SheWolf]

I've thought about it, but, nah - I like my current job, and don't like asking for money.

However, what I was referring to was the Perfectly Progressive / Negative Income Tax I linked to earlier in the thread, which is currently discoverable down in the Loft

Why do you develop such proposals, especially if you know nothing will be attained? There is no chance of reaching a goal in the endeavor. It seems like a waste of time, to be honest. Even if you did hold office, the probability of you passing something ideologically pure has about a zero percent chance.

Not trying to be rude. I don’t understand.

 

[jaeger19]

Hence why I talked about a luxury tax (luxury goods go up in demand more than proportionally to income). If you read the OP, you'll see that I talk about this problem. Perhaps it can't completely replace the current taxes we have now but if we ever feel like raising taxes, this might be a good way to do it.

Its been tried.. google luxury tax and boating building industry. You will see that when a luxury tax was put on.. it ended up killing the luxury boat building industry in the US. It hurt the economy and thus tax revenue far more than it brought in.

 

[ecofarm]

I was thinking the same thing. If we are going to tax consumption, exactly what should we tax and what should we not? I would hope that we wouldn’t tax food, because that would increase the price of food and groceries astronomically. If we put the majority of the sales tax on new car sales and new home purchases, then that could really destroy auto and home sales.

This could dramatically change US consumption behavior, and a person like me travels a lot outside the United States. I would try to buy a lot of things outside of the United States in that case.

Then my husband, he imports and exports goods between countries. Import and export taxes are not sales taxes. Companies like my husband’s do not pay sales taxes on items intended for retail. I assume this would end import/export taxes, but not fees associated with import/export, therefore this whole gimmick seems like a giant tax giveaway for corporations. Average people would be paying astronomical sales taxes but corporations would not pay any taxes at all. That is completely insane. I think that United States corporations should pay taxes

New goods are taxed. Used goods and groceries are not, as per State sales taxes. Corporations don't employ used goods, people do.

 

[noonereal]

The debate over whether taxes should be raised or lowered is a contentious one in the political realm. The argument in favor of lowering taxes states that rich people, who pay the most taxes, are hindered from properly investing in businesses that would increase the general welfare of the public. The counterargument is that rich people end up pocketing most of those benefits while tax cuts come at the expense of public services meant for the lower and middle classes. Assuming the counterargument, it's worth asking the question what do rich people spend their additional revenue on. Conservatives and libertarians argue that rich people will spend it on investment, pouring money into businesses and creating jobs. Progressives and socialists argue that they pocket the revenue and use it to buy an additional mansion or a private yacht.

Recently, I began wondering, maybe we should tax consumption rather than income or

The downside of a neutral consumption tax (i.e. a sales tax) is that it ends up being regressive. You see, people lower on the economic totem pole end up spending a higher percentage of their income while wealthy people are more likely to put income into investment. For this reason, I would propose the tax to be levied on luxury goods (goods that go up in demand more than proportionally to income) and/or nonessential goods. It might also be a good idea to tax people for buying a third home (those buying a second home may simply be transitioning to another area and intend on selling the first home). It might also help deter home speculation.

If implemented properly, rich people will be taxed for buying a mansion or a Ferrari but not for selling stocks, saving money, or donating to charity. This might help bring about the best of both worlds in which conservatives don't have to worry about taxes slowing down economic growth while progressives can rest easy, knowing that the wealthy are paying their fair share.

we need top start taxing all income the same and make it truly progressive

 

[rickc]

Wealth always talks of a sales tax. That way those who spend the majority of their income just making ends meet pay more taxes while those who have a majority of their income in excess of expenses pay no tax on it.

Sales tax is a very regressive tax.

 

[CLAX1911]

The debate over whether taxes should be raised or lowered is a contentious one in the political realm. The argument in favor of lowering taxes states that rich people, who pay the most taxes, are hindered from properly investing in businesses that would increase the general welfare of the public. The counterargument is that rich people end up pocketing most of those benefits while tax cuts come at the expense of public services meant for the lower and middle classes. Assuming the counterargument, it's worth asking the question what do rich people spend their additional revenue on. Conservatives and libertarians argue that rich people will spend it on investment, pouring money into businesses and creating jobs. Progressives and socialists argue that they pocket the revenue and use it to buy an additional mansion or a private yacht.

Recently, I began wondering, maybe we should tax consumption rather than income or

The downside of a neutral consumption tax (i.e. a sales tax) is that it ends up being regressive. You see, people lower on the economic totem pole end up spending a higher percentage of their income while wealthy people are more likely to put income into investment. For this reason, I would propose the tax to be levied on luxury goods (goods that go up in demand more than proportionally to income) and/or nonessential goods. It might also be a good idea to tax people for buying a third home (those buying a second home may simply be transitioning to another area and intend on selling the first home). It might also help deter home speculation.

If implemented properly, rich people will be taxed for buying a mansion or a Ferrari but not for selling stocks, saving money, or donating to charity. This might help bring about the best of both worlds in which conservatives don't have to worry about taxes slowing down economic growth while progressives can rest easy, knowing that the wealthy are paying their fair share.

What we have to do our government is effectively bankrupt at the moment, is cut spending that's the only way.

right now what we're doing to pay down our debt is borrowing from the Federal reserve which that's just the tax on savings accounts.

 

[washunut]

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....

So you are saying the people who run hedge funds do not have political ideologies. Pretty silly comment.

 

[JasperL]

So you are saying the people who run hedge funds do not have political ideologies. Pretty silly comment.

They don't care about ideology - it's about profits, money, regulations. They spend $billions buying both sides of Congress. One thing that is bipartisan is Wall Street must always be fed, as much as it wants. We're seeing it as we speak. We saw it after the 2008 crash.