Sale Tax is regressive

[Brian Stirling]

That's the prebate. Say we implemented a federal sales tax of 20%. At $50,000 annual income, spending every penny of that would cost you $10,000 annually in sales tax. If everyone was prebated that $833 at the start of each month, then spending that $50,000 means you were not taxed one cent. You were made whole even before you paid the tax. If on the other hand you earned only $20,000 annually and spent every penny, then the government takes from you $4,000 annually - but gives you $10,000 annually, just like every other American. Your income is now boosted to $26,000. (Actually probably to $24,000 since presumably you'd also spend the $10,000, of which the government would take back $2,000.)

How do you qualify for a prebate and how do you prevent/limit false claims?


Brian

 

[werepossum]

How do you qualify for a prebate and how do you prevent/limit false claims?


Brian

I can only speak for the FairTax, but under that every head of household would be registered. Single people, married people filing jointly, married people filing separately, based on Social Security numbers just like with income tax. Preventing false claims is even easier than now, since it's easier to not claim income than to invent dependents with government-issued ID. The big difference would be that instead of the IRS deciding how much to take off the top based on what factors the government wishes to encourage, the only differences would be how many people are in each household, the tax percentage, and at what level the tax is calculated. Everybody gets treated equally. Sell drugs? You're still taxed on what you spend. Earn $50,000 as a bartender but report $12,000? You're still taxed on what you spend. Self employed? You're still taxed on what you spend. Don't want the government tracking you? No probs, it'll cost you the prebate. And every dollar you save is pre-tax, whether you are saving for retirement, a house, a vacation or a boob job. You decide what is a worthy investment, not the government.

 

[Mandres]

I think it's an interesting idea - and I think it makes sense to shift the burden of collecting, reporting and remitting tax revenue off of the individual and onto businesses who are better equipped to handle it efficiently.

But the uncertainty surrounding the changes in consumer behavior in response to the new 20-30% higher prices means that we'll never see this happen. The government cannot risk a large decline in tax revenue - the debt service payments must be made, and all contractual obligations must be fulfilled. It's too risky. We may someday see a VAT-like national sales tax but it will not replace the income tax.

 

[fskimospy]

Please support your claims here with specifics. What distorting effects does it limit, and how are they worse than the new distorting effects of heavily taxing consumption? How are work and investment discouraged in the current system? In your system, spending is discouraged. Most economists seem to agree that spending is a primary driver of our economy, if not the primary driver. What's the economic impact of discouraging spending?

Our current tax code has zillions of things carved out, like the mortgage interest deduction. It is economically inefficient to subsidize homeownership and it is distortionary. A consumption tax does not subsidize or penalize any specific type of purchase which makes it easier for people to follow their actual preferences.

Work is discouraged in our current system for the same reason you recognize consumption would be discouraged in a consumption tax system. An income tax fundamentally taxes work. Economists recognize that work is a primary driver of our economy as well, haha. What is the economic impact of discouraging people from working? In fact economists generally favor consumption taxes over income taxes for exactly the reasons I already mentioned.

I agree, one could theoretically devise a consumption tax that was progressive. It would require require an IRS-like organization to administrate it, and it would require punitively high tax rates on the proportionately lower spending of the wealthy, rates of several hundred percent. (Before you try to refute this, explain how my sample millionaire who spends only $125K will be taxed at your same effective rate as the guy who earns -- and spends -- $50K.)

A consumption tax does not need to be the only tax that exists, nor would it be. Your sample person who spends less has already been addressed, and your idea that an IRS like organization would be required is both an unfounded statement and irrelevant to my point.

No, you showed how it can be progressive based on the assumption that everyone spends every dollar they earn. That assumption is wrong. Show us how it can continue to be progressive even in the real world where poor people spend everything they make; rich people do not.

Already covered this. It's not like a consumption tax eliminates all other taxes ever. Have you ever looked at any other country that has a consumption tax? Do they not have any other taxes?

As incomes increases, one spends proportionately less on taxable goods and services. That's reality. So show us a concrete plan to overcome that reality. So far, you've taken the very political approach of declaring you have the solution without offering a substantive plan. Give us details.

Just google 'progressive consumption tax'. For example Ben Cardin has introduced a bill for one. It doesn't go as far as I want but it's an important first step. It basically eliminates the income tax for about 80-90% of people but replaces it with a consumption tax. He still does bad things like keep the mortgage interest deduction (and the income tax exemption should be higher), but Rome wasn't built in a day.

Glad to see that you've come to question my motives as soon as I disagree with you though. Are my motives equally as suspect when I agree with you?

 

[Bowfinger]

Our current tax code has zillions of things carved out, like the mortgage interest deduction. It is economically inefficient to subsidize homeownership and it is distortionary. A consumption tax does not subsidize or penalize any specific type of purchase which makes it easier for people to follow their actual preferences.

That may be an argument for changing the current income tax implementation. It is not an argument for a consumption tax. A consumption tax can also have zillions of things carved out, and it inevitably will as long as we have a Congress that panders to special interests. Your closing sentence is wishful thinking, not an inherent attribute of consumption tax schemes.

Work is discouraged in our current system for the same reason you recognize consumption would be discouraged in a consumption tax system. An income tax fundamentally taxes work. Economists recognize that work is a primary driver of our economy as well, haha. What is the economic impact of discouraging people from working?

While I agree income taxes discourage work to an extent, that effect is much smaller than a consumption tax for two reasons. First, even when work (income) is taxed, more work still yields more income. One is still incented to work more. Second, for most people working is not optional, while spending is. You may not be happy with the return you get from your work efforts, but you still have to pay the bills. Therefore, you still work, even if you think you're underpaid. People have far more discretion over how and when they spend money. (Indeed, this is supposed to be one of the rationales for a consumption tax, that people get to choose how much they want to be taxed.)

I'd also note that in an economy where we already have more people that want to work than we have available jobs, discouraging work has little effect on the economy. We already have an oversupply of workers. Discouraging spending, on the other hand, very directly hits the economy.

In fact economists generally favor consumption taxes over income taxes for exactly the reasons I already mentioned.

Link? Which economists, and what makes them superior to economists who dislike the regressive nature of consumption taxes? Demonstrate that these pro-consumption tax economists aren't a minority and aren't ideologically lopsided.

A consumption tax does not need to be the only tax that exists, nor would it be. Your sample person who spends less has already been addressed, and your idea that an IRS like organization would be required is both an unfounded statement and irrelevant to my point.

Already covered this. It's not like a consumption tax eliminates all other taxes ever. Have you ever looked at any other country that has a consumption tax? Do they not have any other taxes?

You're jumping all over the place in this thread. What other taxes? Your initial post said you wanted to eliminate the income tax. What other taxes will you keep, and how do they create progressiveness?

What other countries are you talking about? Don't wave your hands and say countries generically. Pick the one you think is the best model. Give us something specific we can look at and assess.

No, you did not address my millionaire example. You merely brushed it away with a straw man suggesting I excluded items that you would tax. (I'd made no statements about what would be taxed beyond a generic "goods and services".)

Re. an IRS-like organization, at one point you suggested the consumption tax rate could be adjusted based on total spending, i.e., those who spend more will pay a higher percentage than those who spend less. I agree this could theoretically make a consumption tax more progressive, but it has two implications. First, it would mean sales tax was no longer collected at the point of sale, but would instead have to be calculated based on total spending. This, in turn, requires some sort of organization to collect this information and assess taxes...much like the IRS.

This approach would also require one of two approaches in order to measure spending. Option 1 would be for taxpayers to save every single one of their receipts (or an equivalent electronic record) and report it. The second, and the option you proposed, is that taxpayers would simply report their income, investments, and savings. The not-IRS would then assess taxes based on the calculated spending. But your consumption tax has now morphed into an income tax where savings and investments can be deducted.

Just google 'progressive consumption tax'. For example Ben Cardin has introduced a bill for one. It doesn't go as far as I want but it's an important first step. It basically eliminates the income tax for about 80-90% of people but replaces it with a consumption tax. He still does bad things like keep the mortgage interest deduction (and the income tax exemption should be higher), but Rome wasn't built in a day.

Nor was Rome destroyed in a day. His proposal already carves out exemptions for special treatment right from day one. I see little chance it will get better over time. The other interesting note about Cardin's proposal is that his proposed rates have not been validated. He eliminates personal income taxes for most Americans, cuts corporate tax rates in half, but only adds a 10% consumption tax. That seems unrealistic, especially given other studies on U.S. consumption tax rates.

Glad to see that you've come to question my motives as soon as I disagree with you though. Are my motives equally as suspect when I agree with you?

Oh FFS, don't be childish. I didn't question your motives at all. I pointed out that you've been resistant to citing authoritative sources or providing details that might be used to factually assess your claims. You've criticized some politicians for using that same tactic. You've also criticized many others here. All I'm asking is that you give us substance instead of vague assertions.

By the way, thanks for the suggestion about Googling progressive consumption tax. I found this: The hottest tax idea in Washington is actually terrible. It seems a good counterpoint to your claims. That it addresses many of the same issues I did is just the icing on the cake.

 

[fskimospy]

That may be an argument for changing the current income tax implementation. It is not an argument for a consumption tax. A consumption tax can also have zillions of things carved out, and it inevitably will as long as we have a Congress that panders to special interests. Your closing sentence is wishful thinking, not an inherent attribute of consumption tax schemes.

By that logic no tax system is any simpler than any other. I don't find that persuasive in the slightest.

While I agree income taxes discourage work to an extent, that effect is much smaller than a consumption tax for two reasons. First, even when work (income) is taxed, more work still yields more income. One is still incented to work more. Second, for most people working is not optional, while spending is. You may not be happy with the return you get from your work efforts, but you still have to pay the bills. Therefore, you still work, even if you think you're underpaid. People have far more discretion over how and when they spend money. (Indeed, this is supposed to be one of the rationales for a consumption tax, that people get to choose how much they want to be taxed.)

First, your statement that the work disincentives are smaller than consumption disincentives is without support. Second, spending is not optional, and third, people 'choose' how much they get taxed insofar as they choose to live the life to which their income affords them.

I'd also note that in an economy where we already have more people that want to work than we have available jobs, discouraging work has little effect on the economy. We already have an oversupply of workers. Discouraging spending, on the other hand, very directly hits the economy.

We are talking about the overall effectiveness of tax systems, not specific and current economic issues. While we should definitely stimulate aggregate demand, that has no bearing on whether or not we should use a distorted and inefficient tax system with which to fund it.

Link? Which economists, and what makes them superior to economists who dislike the regressive nature of consumption taxes? Demonstrate that these pro-consumption tax economists aren't a minority and aren't ideologically lopsided.

People all the way from Dean Baker to Alan Greenspan think that consumption taxes are a better way to go. It's not even a particularly controversial idea and I'm surprised you didn't know this?

If you'd like some research on a particularly interesting progressive consumption tax called the X tax that people of all ideological stripes seem to like here you go:

http://eml.berkeley.edu/~auerbach/ftp/taxreform/flatfinal.pdf

And here's how the X tax relates more broadly:

https://www.princeton.edu/ceps/workingpapers/93bradford.pdf

You're jumping all over the place in this thread. What other taxes? Your initial post said you wanted to eliminate the income tax. What other taxes will you keep, and how do they create progressiveness?

I'm not jumping anywhere, I was simply correcting an unfounded assumption. Basically everything I've said has been in response to some accusation or argument against consumption taxes that someone has said. If anyone's jumping all over the place it's you guys.

Your posts clearly indicated you thought a consumption tax replaced all other taxes, otherwise you couldn't have made the statements you did. Why would I need to come up with a comprehensive list of what would stay and what would go?

What other countries are you talking about? Don't wave your hands and say countries generically. Pick the one you think is the best model. Give us something specific we can look at and assess.

Why should I pick only one country? Go look at the entire EU. If you want to look at a country that you think does an especially good or poor job with a consumption tax have at it.

No, you did not address my millionaire example. You merely brushed it away with a straw man suggesting I excluded items that you would tax. (I'd made no statements about what would be taxed beyond a generic "goods and services".)

You actually made several statements that implicitly excluded certain things from taxation which I never did. You are also using the term 'straw man' incorrectly.

Re. an IRS-like organization, at one point you suggested the consumption tax rate could be adjusted based on total spending, i.e., those who spend more will pay a higher percentage than those who spend less. I agree this could theoretically make a consumption tax more progressive, but it has two implications. First, it would mean sales tax was no longer collected at the point of sale, but would instead have to be calculated based on total spending. This, in turn, requires some sort of organization to collect this information and assess taxes...much like the IRS.

Except vastly smaller in scale and vastly simpler in execution, both of which are important points, no?

This approach would also require one of two approaches in order to measure spending. Option 1 would be for taxpayers to save every single one of their receipts (or an equivalent electronic record) and report it. The second, and the option you proposed, is that taxpayers would simply report their income, investments, and savings. The not-IRS would then assess taxes based on the calculated spending. But your consumption tax has now morphed into an income tax where savings and investments can be deducted.

Making it... not an income tax as your tax rate is not determined by your income.

Nor was Rome destroyed in a day. His proposal already carves out exemptions for special treatment right from day one. I see little chance it will get better over time. The other interesting note about Cardin's proposal is that his proposed rates have not been validated. He eliminates personal income taxes for most Americans, cuts corporate tax rates in half, but only adds a 10% consumption tax. That seems unrealistic, especially given other studies on U.S. consumption tax rates.

Sure but that's irrelevant. I simply pointed you to an outline of the sort of proposal we're talking about here which is that a consumption tax works perfectly well within an overall progressive system.

Oh FFS, don't be childish. I didn't question your motives at all. I pointed out that you've been resistant to citing authoritative sources or providing details that might be used to factually assess your claims. You've criticized some politicians for using that same tactic. You've also criticized many others here. All I'm asking is that you give us substance instead of vague assertions.

I actually simply said I favored a consumption tax and you went off and said a bunch of wrong things that I corrected like that those taxes are always regressive, etc. On what planet am I required to develop a detailed proposal for every policy I say I support? Should I hold you to that standard? If so, you've got a lot of work to do with just the assertions you made in the post I'm replying to.

I've provided specific examples of what I'm talking about and showed specifically the flaws in both computation and logic that people who have come out against it have displayed. What you're basically saying is that if I want to say I support a consumption tax instead of an income tax I should have a detailed plan created that can be critiqued and subjected to empirical analysis. That's stupid.

It's a common debate tactic to ask for unreasonable amounts of information from your opponent in order to make it impossible for them to reasonably respond. See buckshot for examples.

By the way, thanks for the suggestion about Googling progressive consumption tax. I found this: The hottest tax idea in Washington is actually terrible. It seems a good counterpoint to your claims. That it addresses many of the same issues I did is just the icing on the cake.

Oh good, an op-ed. Editorial pieces are not useful analysis.

 

[Bowfinger]

By that logic no tax system is any simpler than any other. ...

OK? That was my point, that your system has no inherent advantage when it comes to loopholes and special exclusions. You're the one trying to use it to sell your approach.

First, your statement that the work disincentives are smaller than consumption disincentives is without support. ...

Untrue. I supported it with my reasoning. You've offered nothing to rebut my reasoning.

Second, spending is not optional ...

I said people have more discretion with their spending, which is perfectly true. This is something consumption tax boosters generally use as a selling point. In fact, this appears to be a primary rationale for those economists who support consumption taxes: increased savings instead of spending. I also acknowledged this savings incentive in my very first reply to you.

We are talking about the overall effectiveness of tax systems, not specific and current economic issues. ...

We were talking about whether the economic impact of discouraging earning is greater than the economic impact of discouraging spending. You claimed it is, but have yet to support that claim:

"It offers large benefits over the current system as it sharply limits the distorting effects of our current tax system and stops disincentivizing work and investment."
​

I merely asked you to support that this benefit is greater than the cost of discouraging spending. That's hardly unreasonable. You do it all the time.

People all the way from Dean Baker to Alan Greenspan think that consumption taxes are a better way to go. It's not even a particularly controversial idea and I'm surprised you didn't know this?

You made an unsupported assertion that, "economists generally favor consumption taxes over income taxes for exactly the reasons I already mentioned." I just asked you -- again -- to support this assertion. That is hardly unreasonable, yet you have not yet done so.

If you'd like some research on a particularly interesting progressive consumption tax called the X tax that people of all ideological stripes seem to like here you go:

http://eml.berkeley.edu/~auerbach/ftp/taxreform/flatfinal.pdf

And here's how the X tax relates more broadly:

https://www.princeton.edu/ceps/workingpapers/93bradford.pdf

I agree it's interesting. One of the first things I see is it attempts to preserve progressiveness by keeping an income tax component. There's no analysis showing how successful it is in this. It also requires an IRS-like tax agency.

I'm not jumping anywhere, I was simply correcting an unfounded assumption. Basically everything I've said has been in response to some accusation or argument against consumption taxes that someone has said. If anyone's jumping all over the place it's you guys.

Yes, that's how discussion works. You make a point, someone challenges it, and (ideally) you counter the challenge by providing more or new information. In this thread you've largely avoided offering anything specific to support your initial generic claim. You've instead countered with new generic claims. It's turned the discussion into a game of whack-a-mole instead of actually getting into the details of real-world, progressive consumption tax.

Your posts clearly indicated you thought a consumption tax replaced all other taxes, otherwise you couldn't have made the statements you did. Why would I need to come up with a comprehensive list of what would stay and what would go?

That's false. I said nothing about other taxes until you introduced them as something that would still counter the inherent regressiveness of consumption taxes: "Also a consumption tax doesn't replace every other tax that exists, it just replaces the income tax." (Your post #24.)

So, I'll ask again, what other taxes are going to increase progressiveness? The income tax is currently the only significant progressive tax we pay. Everything else -- e.g., sales taxes, use taxes, property taxes, gas taxes -- are largely flat or regressive.

Why should I pick only one country? ...

To "give us something specific we can look at and assess." It's yet another request for something we can use for a real discussion instead of generic, unsupported assertions. If I pick the country, you'll just use it for the next round of whack-a-mole, where you dismiss anything critical I find with a new generic claim about other countries.

You actually made several statements that implicitly excluded certain things from taxation which I never did. You are also using the term 'straw man' incorrectly.

Both sentences above are incorrect. I asked you what YOU would tax and gave a list of possibilities. I also accurately pointed out that you refuted an argument I did not make -- a straw man -- by claiming I excluded those things I asked you about. I did not.

Except vastly smaller in scale and vastly simpler in execution, both of which are important points, no?

The devil's in the details. Not-IRS could be smaller and simpler, or it could be even bigger and more complicated. This would depend entirely on the specific details of this new tax, which is why I keep asking for them. We cannot assess your claims fairly and accurately as long as you're unwilling to provide such detail.

Making it... not an income tax as your tax rate is not determined by your income. ...

Right. It's not an income tax, it's a tax where you report your income, subtract deductions, and apply a variable tax rate based on that adjusted income. That's nothing like an income tax. /s

It's a common debate tactic to ask for unreasonable amounts of information from your opponent in order to make it impossible for them to reasonably respond. See buckshot for examples.

It's also a common debate tactic to make unsupported claims and to evade reasonable requests for specifics that can be used to more intelligently assess one's position. Buckshot is an example of that as well.

Oh good, an op-ed. Editorial pieces are not useful analysis.

Yet he offered far more specific details and cited far more sources than you did for your opinions.

 

[buckshot24]

Buckshot is an example of that as well.

Now that is a low blow.

 

[buckshot24]

I would like to hear about how a progressive consumption based tax could work as well.

 

[fskimospy]

OK? That was my point, that your system has no inherent advantage when it comes to loopholes and special exclusions. You're the one trying to use it to sell your approach.

Economists disagree, as shown by the papers I cited. Did you read them?

Untrue. I supported it with my reasoning. You've offered nothing to rebut my reasoning.

By this logic I have supported what I said with my reasoning yet you declared that insufficient. You can't have it both ways.

I said people have more discretion with their spending, which is perfectly true. This is something consumption tax boosters generally use as a selling point. In fact, this appears to be a primary rationale for those economists who support consumption taxes: increased savings instead of spending. I also acknowledged this savings incentive in my very first reply to you.

We were talking about whether the economic impact of discouraging earning is greater than the economic impact of discouraging spending. You claimed it is, but have yet to support that claim:

"It offers large benefits over the current system as it sharply limits the distorting effects of our current tax system and stops disincentivizing work and investment."
​

I merely asked you to support that this benefit is greater than the cost of discouraging spending. That's hardly unreasonable. You do it all the time.

I have already done that with the papers I linked. Will you admit that it is more efficient now?

You made an unsupported assertion that, "economists generally favor consumption taxes over income taxes for exactly the reasons I already mentioned." I just asked you -- again -- to support this assertion. That is hardly unreasonable, yet you have not yet done so.

I've given you a wide swath of economists from hugely different backgrounds that all agree that consumption taxes are superior. You have offered nothing to dispute this. If you find my evidence insufficient then please tell me what evidence you will accept.

I agree it's interesting. One of the first things I see is it attempts to preserve progressiveness by keeping an income tax component. There's no analysis showing how successful it is in this. It also requires an IRS-like tax agency.

You should read it more carefully. It is a consumption tax. As for how successful it is, please describe what evidence you would accept.

Yes, that's how discussion works. You make a point, someone challenges it, and (ideally) you counter the challenge by providing more or new information. In this thread you've largely avoided offering anything specific to support your initial generic claim. You've instead countered with new generic claims. It's turned the discussion into a game of whack-a-mole instead of actually getting into the details of real-world, progressive consumption tax.

I do agree that this has become a game of whack a mole. You have provided literally nothing to back up your assertions while I have offered proposed legislation and multiple academic analyses of my proposed solution.

Until you can at least match what I have provided you are being a hypocrite.

That's false. I said nothing about other taxes until you introduced them as something that would still counter the inherent regressiveness of consumption taxes: "Also a consumption tax doesn't replace every other tax that exists, it just replaces the income tax." (Your post #24.)

So, I'll ask again, what other taxes are going to increase progressiveness? The income tax is currently the only significant progressive tax we pay. Everything else -- e.g., sales taxes, use taxes, property taxes, gas taxes -- are largely flat or regressive.

Untrue, you first mentioned other taxes in post #10. As I said before, I have no obligation to deploy a detailed plan to someone who has offered literally nothing other than generalized statements without support.

To "give us something specific we can look at and assess." It's yet another request for something we can use for a real discussion instead of generic, unsupported assertions. If I pick the country, you'll just use it for the next round of whack-a-mole, where you dismiss anything critical I find with a new generic claim about other countries.

I've given you a number of things to assess, you have ignored them.

Both sentences above are incorrect. I asked you what YOU would tax and gave a list of possibilities. I also accurately pointed out that you refuted an argument I did not make -- a straw man -- by claiming I excluded those things I asked you about. I did not.

That is not what I claimed. I don't think you understand what a straw man is, because I did not make one.

The devil's in the details. Not-IRS could be smaller and simpler, or it could be even bigger and more complicated. This would depend entirely on the specific details of this new tax, which is why I keep asking for them. We cannot assess your claims fairly and accurately as long as you're unwilling to provide such detail.

See above.

Right. It's not an income tax, it's a tax where you report your income, subtract deductions, and apply a variable tax rate based on that adjusted income. That's nothing like an income tax. /s

It's a tax where you are taxed on what you spend, not on what you make. You're right, it's nothing like an income tax. What's the confusion?

It's also a common debate tactic to make unsupported claims and to evade reasonable requests for specifics that can be used to more intelligently assess one's position. Buckshot is an example of that as well.

Well you should be thanking me for doing so instead of ignoring them then.

Yet he offered far more specific details and cited far more sources than you did for your opinions.

Clearly not, and that wouldn't make an editorial any more useful as evidence. People seek out editorials to have someone say what they want to say better than they can themselves. They are not objective, rigorous, or particularly interesting.

You can save yourself some time by never linking an editorial in a discussion with me again unless you're pointing to a primary source it contains. They are a waste of time.

 

[werepossum]

Economists disagree, as shown by the papers I cited. Did you read them?

By this logic I have supported what I said with my reasoning yet you declared that insufficient. You can't have it both ways.

I have already done that with the papers I linked. Will you admit that it is more efficient now?

I've given you a wide swath of economists from hugely different backgrounds that all agree that consumption taxes are superior. You have offered nothing to dispute this. If you find my evidence insufficient then please tell me what evidence you will accept.

You should read it more carefully. It is a consumption tax. As for how successful it is, please describe what evidence you would accept.

I do agree that this has become a game of whack a mole. You have provided literally nothing to back up your assertions while I have offered proposed legislation and multiple academic analyses of my proposed solution.

Until you can at least match what I have provided you are being a hypocrite.

Untrue, you first mentioned other taxes in post #10. As I said before, I have no obligation to deploy a detailed plan to someone who has offered literally nothing other than generalized statements without support.

I've given you a number of things to assess, you have ignored them.

That is not what I claimed. I don't think you understand what a straw man is, because I did not make one.

See above.

It's a tax where you are taxed on what you spend, not on what you make. You're right, it's nothing like an income tax. What's the confusion?

Well you should be thanking me for doing so instead of ignoring them then.

Clearly not, and that wouldn't make an editorial any more useful as evidence. People seek out editorials to have someone say what they want to say better than they can themselves. They are not objective, rigorous, or particularly interesting.

You can save yourself some time by never linking an editorial in a discussion with me again unless you're pointing to a primary source it contains. They are a waste of time.

Oddly, you and I are on the same side here. I suspect you would also agree that the regressive nature of consumption taxes on the very high earners is a major political hurdle, one that I would argue is insurmountable. Do you have a solution for that, to handle the Wade Boggs and Warren Buffets of the world to the left's satisfaction? If the average American family ends up paying 10% but these people pay 0.05%, I don't see how this could ever be sold.

 

[fskimospy]

Oddly, you and I are on the same side here. I suspect you would also agree that the regressive nature of consumption taxes on the very high earners is a major political hurdle, one that I would argue is insurmountable. Do you have a solution for that, to handle the Wade Boggs and Warren Buffets of the world to the left's satisfaction? If the average American family ends up paying 10% but these people pay 0.05%, I don't see how this could ever be sold.

I would say that the X Tax that I linked is a good way to maintain the fundamental progressivity of our federal tax system while switching towards a consumption tax.

Also, even if a full consumption tax couldn't be sold and we retained some income tax elements for the highest earners we would still benefit from the improved efficiency overall, which might be a good compromise solution.

Edit: finally, a progressive tax system is not the only way to improve income inequality. If you look at European countries they don't actually have very progressive tax rates, they achieve a more equitable distribution by fairly high taxes across the board with a lot of services provided. I imagine people won't like that either but there's more than one way to skin a cat.

 

[Bowfinger]

I don't have time to dissect this line by line, so I'll just call out some of the more blatant deceptions.

Economists disagree, as shown by the papers I cited. Did you read them?
[ ... ]
You should read it more carefully. It is a consumption tax.

Follow you own advice. Even Bradford states his X tax is a "compensation tax" on individuals.

By this logic I have supported what I said with my reasoning yet you declared that insufficient. You can't have it both ways.

Not true. I responded with counterarguments and/or asked for missing information needed to address your assertions. You offered no links to support your claims until very late in the discussion.

Untrue, you first mentioned other taxes in post #10. ...

Repeating the same lie doesn't make it more true. As I've pointed out twice before, that post was me ASKING you what things YOU would and would not tax in YOUR plan. That's a fact.

You can save yourself some time by never linking an editorial in a discussion with me again unless you're pointing to a primary source it contains. They are a waste of time.

I find this especially ironic when debating economics, a "science" that spends far more time on conjecture and opinions that it does on objective fact.

 

[fskimospy]

I don't have time to dissect this line by line, so I'll just call out some of the more blatant deceptions.

Interesting how you went from vehemently denying you were questioning my motives to questioning my motives in about 24 hours, haha. Since you consider me to be so unprincipled in my discussion with you here, presumably you view me to be equally unprincipled when I agree with you, no?

I've found on here that for the most part 'you are lying' means 'you said something I don't agree with.

Follow you own advice. Even Bradford states his X tax is a "compensation tax" on individuals.

Please follow my advice and actually read what I linked. Bradford's intro states it is a consumption tax very clearly:

Second, in determining the company level tax base and in motivating the form of integration of company and worker taxation, consumption replaces the accrual income ideal that, in principle, underlies so much of the present tax design.

Not true. I responded with counterarguments and/or asked for missing information needed to address your assertions. You offered no links to support your claims until very late in the discussion.

'Counter arguments' that were nothing more than the generalized statements that you complained about. If anything I have been indulgent here as my original post was a simple stated preference for consumption taxes from which you have asked that I draft detailed policy proposals while providing nothing in return.

Repeating the same lie doesn't make it more true. As I've pointed out twice before, that post was me ASKING you what things YOU would and would not tax in YOUR plan. That's a fact.

Ahh, more accusations of lying. Classy! So in other words you weren't asking about those other taxes, you just thought that a consumption tax would sit on top of investment taxes that already existed? That would be a pretty crazy arrangement that makes no sense, so I assumed you weren't asking if I wanted to do something crazy that made no sense. Apparently you were?

I find this especially ironic when debating economics, a "science" that spends far more time on conjecture and opinions that it does on objective fact.

How hard a science is or is not is no excuse for using editorials as evidence. They aren't. They exist almost entirely to preach to the converted.

 

[Bowfinger]

Interesting how you went from vehemently denying you were questioning my motives to questioning my motives in about 24 hours, haha. Since you consider me to be so unprincipled in my discussion with you here, presumably you view me to be equally unprincipled when I agree with you, no?

Yawn. Another juvenile attempt to change the subject. You made misleading comments. Own them.

I've found on here that for the most part 'you are lying' means 'you said something I don't agree with.

I've found people who make such allegations are usually just unhappy they've been caught.

Please follow my advice and actually read what I linked. Bradford's intro states it is a consumption tax very clearly:

Perhaps you should read beyond the intro:

"individuals are taxed only under the compensation tax"

​

'Counter arguments' that were nothing more than the generalized statements that you complained about. If anything I have been indulgent here as my original post was a simple stated preference for consumption taxes from which you have asked that I draft detailed policy proposals while providing nothing in return.

That's a creative bit of revisionist history. That aside, please forgive me for having the temerity to ask you to support some of your assertions with substance.

Ahh, more accusations of lying. Classy! So in other words you weren't asking about those other taxes, you just thought that a consumption tax would sit on top of investment taxes that already existed? That would be a pretty crazy arrangement that makes no sense, so I assumed you weren't asking if I wanted to do something crazy that made no sense. Apparently you were?

Another straw man. Disappointing.

For all your misdirection, this is really pretty simple. You said:

"In a consumption tax scenario basically everything is taxed."
​

Your exact words. I just asked you what that "basically everything" included, then listed examples (each followed by a question mark). I had no idea how "crazy" your vision was.

I find it quite puzzling that you are so butt-hurt about such a simple question, and that you continue to misrepresent it.

How hard a science is or is not is no excuse for using editorials as evidence. They aren't. They exist almost entirely to preach to the converted.

Not all op-eds are the same, but whatever. One could make the same claim about economics papers, but then I'd be "exaggerating" too. Some are more vacuous than others.


You have a fine day. You've shown us that some economists have put a lot of thought into countering the inherent regressiveness of consumption taxes. That's cool. You've failed to show they've succeeded, even on paper, without a hybrid approach that includes an income component.

 

[fskimospy]

Yawn. Another juvenile attempt to change the subject. You made misleading comments. Own them.

I've found people who make such allegations are usually just unhappy they've been caught.

So to be clear you're calling me a liar repeatedly and then complaining about juvenile attempts to change the subject. Surely you see how funny that is.

I have not made a single comment that I intended to be misleading. You're reacting very badly to someone challenging what appears to be a deeply held belief of yours with actual facts and evidence.

Perhaps you should read beyond the intro:"individuals are taxed only under the compensation tax"

I've actually read the whole paper and I don't think you understood what you were reading. Both the compensation tax and the business tax are consumption based taxes. The paper is kind of jargony so you might not have understood this, but here's a fairly lengthy paper discussing it in more detail so you might understand it better.

http://www.law.uchicago.edu/files/files/163.daw_.x-tax.pdf

http://www.oxfordscholarship.com/vi...8802.001.0001/acprof-9780199948802-chapter-13

These two-tier integrated consumption taxes should not be confused with a hybrid income/consumption tax just because the legal incidence of the tax is partly on wages, which for individual taxpayers is a component of income. The Flat Tax, X-Tax, and e-Tax are every bit consumption taxes, augmented with some algebraic magic. They start with a business-level consumption tax and subtract wages, which are simply taxed in the hands of wage earners. Wage earners would be expected to be paid sufficiently higher wages than under a pure business-level consumption tax in order to compensate them for bearing the legal incidence of the wage portion of the consumption tax.

If after reading these both you still want to argue that the X Tax has an income tax component please provide a credible source that argues so.

That's a creative bit of revisionist history. That aside, please forgive me for having the temerity to ask you to support some of your assertions with substance.

It also has the virtue of being true. You have still provided no backup for your statements other than an editorial piece while continually complaining about my lack of support despite the numerous sources I have supplied.

Another straw man. Disappointing.

For all your misdirection, this is really pretty simple. You said:

"In a consumption tax scenario basically everything is taxed."
​

Your exact words. I just asked you what that "basically everything" included, then listed examples (each followed by a question mark). I had no idea how "crazy" your vision was.

I find it quite puzzling that you are so butt-hurt about such a simple question, and that you continue to misrepresent it.

So the guy complaining about someone else acting juvenile is now saying 'you're butt hurt!'? I interpreted your question reasonably, if you meant something else that's fine. Immediately turning to calling someone dishonest is stupid and beneath you.

Not all op-eds are the same, but whatever. One could make the same claim about economics papers, but then I'd be "exaggerating" too. Some are more vacuous than others.

You have a fine day. You've shown us that some economists have put a lot of thought into countering the inherent regressiveness of consumption taxes. That's cool. You've failed to show they've succeeded, even on paper, without a hybrid approach that includes an income component.

This statement comes from you not understanding the papers you read. There is no income component, the X tax is a pure consumption tax.

 

[Bowfinger]

[ ... repetitive noise clipped ... ]
I've actually read the whole paper and I don't think you understood what you were reading. Both the compensation tax and the business tax are consumption based taxes. The paper is kind of jargony so you might not have understood this, but here's a fairly lengthy paper discussing it in more detail so you might understand it better.

http://www.law.uchicago.edu/files/files/163.daw_.x-tax.pdf

http://www.oxfordscholarship.com/vi...8802.001.0001/acprof-9780199948802-chapter-13

Your second link is pay-walled. Here's a quote from your first:

In the x-tax and similar two-tier consumption taxes, workers are directly taxed on their wages and, therefore, businesses may deduct wages. The advantage of doing this is that wages can be taxed at a progressive rate in accordance with the individual circumstances of the worker. The disadvantage, of course, is that individuals must now file returns. Because the only item on their returns is wages, however, the idea is that this additional requirement would not increase compliance costs too dramatically.
​

I've been more than indulgent in reading your papers. I'm done.

So the guy complaining about someone else acting juvenile is now saying 'you're butt hurt!'?

You started it haha.

I interpreted your question reasonably, if you meant something else that's fine. Immediately turning to calling someone dishonest is stupid and beneath you. ...

First, it's not reasonable to interpret a question about what YOU would do as a statement about what I would do. FFS, I wasn't even proposing a plan. I was asking about yours. Second, while ignorance may be a legitimate defense the first time you misrepresent someone's words, it becomes willful when you continue to do so after being notified of your error. Third, I didn't say you're stupid. You are clearly overly passionate about consumption taxes, however.

You've shown us that some economists have put a lot of thought into countering the inherent regressiveness of consumption taxes. That's cool. You've failed to show they've succeeded, even on paper, without a hybrid approach that includes an income component.

 

[fskimospy]

Your second link is pay-walled. Here's a quote from your first:

In the x-tax and similar two-tier consumption taxes, workers are directly taxed on their wages and, therefore, businesses may deduct wages. The advantage of doing this is that wages can be taxed at a progressive rate in accordance with the individual circumstances of the worker. The disadvantage, of course, is that individuals must now file returns. Because the only item on their returns is wages, however, the idea is that this additional requirement would not increase compliance costs too dramatically.
​

I've been more than indulgent in reading your papers. I'm done.



You started it haha.



First, it's not reasonable to interpret a question about what YOU would do as a statement about what I would do. FFS, I wasn't even proposing a plan. I was asking about yours. Second, while ignorance may be a legitimate defense the first time you misrepresent someone's words, it becomes willful when you continue to do so after being notified of your error. Third, I didn't say you're stupid. You are clearly overly passionate about consumption taxes, however.

You've shown us that some economists have put a lot of thought into countering the inherent regressiveness of consumption taxes. That's cool. You've failed to show they've succeeded, even on paper, without a hybrid approach that includes an income component.

I literally provided you with a link and quote as to the fact that it does not have an income component. If you can't accept that simple fact I don't know what else to tell you. If you read the papers more thoroughly you will see that the progressive tax on wages is a consumption tax, not a traditional income tax. I have seriously never even heard someone try to argue that it has an income tax component before.

Again, if you would like to claim that the X Tax includes an income tax component then provide a link that says so. If you can't, then you should admit that it does not.

 

[Bowfinger]

I literally provided you with a link and quote as to the fact that it does not have an income component. If you can't accept that simple fact I don't know what else to tell you. If you read the papers more thoroughly you will see that the progressive tax on wages is a consumption tax, not a traditional income tax. I have seriously never even heard someone try to argue that it has an income tax component before.

Again, if you would like to claim that the X Tax includes an income tax component then provide a link that says so. If you can't, then you should admit that it does not.

And I literally provided you with two quotes from your own links stating they include a progressive tax on wages/compensation.

 

[werepossum]

I would say that the X Tax that I linked is a good way to maintain the fundamental progressivity of our federal tax system while switching towards a consumption tax.

Also, even if a full consumption tax couldn't be sold and we retained some income tax elements for the highest earners we would still benefit from the improved efficiency overall, which might be a good compromise solution.

Edit: finally, a progressive tax system is not the only way to improve income inequality. If you look at European countries they don't actually have very progressive tax rates, they achieve a more equitable distribution by fairly high taxes across the board with a lot of services provided. I imagine people won't like that either but there's more than one way to skin a cat.

Older people certainly wouldn't like it, but the millennials are demanding more free stuff and generally speaking don't want the responsibility of, say, managing their own retirement funds. I'd guess millennials would love more government services in return for higher tax rates - IF they are satisfied that very high earners aren't getting a break.

The main reason I favor consumption taxes is because they can equalize costs to make American-made goods somewhat more competitive without tariffs. (I personally like tariffs but they will always be either shut down from all the free trade agreements we've signed, or matched by retaliatory tariffs - still a net positive since we are a net importer, but a hit on our exports.) Assuming we replaced both corporate and personal income taxes, nations with low regulatory burdens, low labor rates, and/or low tax rates would see their products hit with a substantial portion of American companies' cost of doing business. Obviously American companies would not gain a real advantage, but at least some of the cost disadvantages would be negated as foreign-made goods would have to fund their home nation's cost of government plus ours. Also, a company would have no tax benefits from shifting production off-shore for goods destined for the US market because in effect, doing so would cause them to support two government's taxes without dodging the high American corporate income tax as they do today. They would still have the benefits of lower wages and lower regulatory burden, of course, but I think those are more self-repairing.

Of course, all that assumes that the General Electrics of the world, who currently by CongressCritters to get tax breaks to avoid paying some or even all of our high corporate tax rates, were not successful in getting those same CongressCritters to write laws rebating the sale tax consumers pay for their foreign-made goods, to make them more competitive and/or more profitable.

 

[fskimospy]

And I literally provided you with two quotes from your own links stating they include a progressive tax on wages/compensation.

Yes and I'm saying you didn't understand what you read. There is no argument among economists that the X tax is a consumption tax.

Provide evidence otherwise or stop this stupidity.

 

[Bowfinger]

Yes and I'm saying you didn't understand what you read. There is no argument among economists that the X tax is a consumption tax.

Provide evidence otherwise or stop this stupidity.

Yes, a consumption tax with a wage/compensation component for workers.

 

[Zorkorist]

Lenin and Stalin, arguing.

-John

 

[Zorkorist]

Can I be Mao Tse Tung?!

-John

 

[BxgJ]

Older people certainly wouldn't like it, but the millennials are demanding more free stuff and generally speaking don't want the responsibility of, say, managing their own retirement funds. I'd guess millennials would love more government services in return for higher tax rates - IF they are satisfied that very high earners aren't getting a break.

About this, if that's true that they don't want to manage their retirement..... have they noticed the fate of so many pension funds in recent years? I would much rather get the money up front and let it grow, than depend on a fund not being mismanaged. Perhaps because I'm a gen-x'er, and invest as much as I can..... I don't know.