I had a quick idea I wanted to get some feedback on.
.
Goal:
- Fair: avoid situations where some pay taxes while other's don't (tax evasion schemes, loopholes, black market)
- Progressive: people making more pay more
- Simple: no accountant/lawyer needed
.
Idea:
What if we only had sales tax (no income tax)?
.
When I first heard of this, it was from Bill O'Reilly which I disagree with on most topics. I immediately discarded the idea as poor people spend all their disposable income, but rich people only spend a small part. In other words, poor people would pay a higher effective rate, which in my view is unfair (even though in absolute terms they'd still pay more tax).
.
But it got me thinking, what if the sales tax applied not only to physical goods but also to virtual and financial products? It would be similar to the so called "Speculation tax" Bernie Sanders and others keep talking about. Rich people would effectively pay tax when they purchase bonds, stocks etc the same way they would if they bought a car.
.
Side-effects (that i can think of, let me know if you see others):
- Recude the size of the IRS (cost reduction)
- No need for audits, accountants etc (productivity increase)
- No tax loopholes and no reason to store profits in a tax haven country
- People taking cash payment (tips, work for cash) are now taxed to proportionally to their income (assuming they need to buy things). This applies to organized crime too. (revenue increase)
.
Potential problems:
- Company that both buys products from outside the country and has workforce outside of country. That company effectively does not pay taxes... but then again, is that company really using the country's resources such as roads?
- People stop charging sales tax. Right now i think people avoid charging sales taxes because they themselves want to avoid the income tax. If they no longer have to pay income tax, I think they'd be no reason for them to not charge the sales tax... other than to give the customer a discount.
- No income tax deductions. Harder to incentives behavior, like giving to charity (although giving to charity is often a tax loophole), green energy initiatives. Would need to give deduction at source.
.
Curious to hear your thoughts, cheers!
So... what determines a rich person? What determines a poor person? Is the poor person going to be taxed on the funds in his 401k? What about the rich person? How about bonds? I mean "junk bonds" obviously because everybody who doesn't know what those are hates them. But government bonds? Municipal bonds? School bonds? Church bonds? What about corporations? Are they being taxed on securities purchases? What about issuances of securities? What about non-profit corporations? Like, say, the NFL? Who's going to collect this tax? Who's going to monitor it? What if I buy foreign securities? What if foreigners buy our securities? __________________________________________________________ Speculation taxes are not used to raise money. They're used to curb the use of derivatives, options and other financial instruments that main street USA doesn't understand. Nader has called for them before. The British have had one since 1694. The point of doing this is it theoretically keeps Goldman Sachs from inventing things like CDOs, CDS and other alphabet-soup 3rd-order casino games by making it a pain in the ass to apply multipliers - the idea being that ten thousand options on the April 15 GM .70 can be had for pennies if you only carry it for a few days but if you charge a penny on every share you have an option on, there's a $100 "tax" which will likely kill your speculative desires, thereby discouraging people from trading options. But as far as "real" money goes, that's ten thousand shares of a stock at $31 a share and you're only pulling in a hundred bucks. So they work for that, up to a point. The problem is that the SEC is ponderously slow at coming up with new regulation because they work for the government. Investment banks, on the other hand, work for the devil so they can come up with new ways to profit off money much faster than any government regulator can dream of controlling. And even then, we're only talking about a nuisance tax, a little sand in the gears to slow things down. If you wanted to get, like, real money out of them... Your choice is 300 million americans, each crunching through the 1040, trying to pickaxe back the money that's already been withheld through an arcane system of partial self-reportage OR The toughest, nastiest, quantiest megacorporations in the world doing their damnedest to hide the money that you don't know about. Which do you think is going to generate more tax revenue?
This comment is certainly testing the theory that old topics don't die on Hubski, but... What about Georgisim, which is a tax on the unimproved value of land? As opposed to other taxation systems, this one actually encourages economic efficiency by encouraging the maximization of the profitable use of land. And economists say the tax cannot be passed onto laborers or tenants, that it will always come out of the profit of the land owners.
Have each citizen pay the service provider directly for the portion of the service they use, at the time of consumption. Allow the service provider to charge an administrative tax on top of the service tax to cover expenses. This policy will have problems, "toll sidewalks" being one of the easier ones. But it solves a lot of big problems. How well does it satisfy your goals? Fair: This is very hard to pin down. People who pay more will argue that any system is unfair, and people who pay less will argue that it is fair. Your goal, to "avoid situations where some pay taxes while other's don't" is tricky. Smokers pay tobacco tax, non-smokers don't. Many "loopholes" are created for good reasons: charities don't pay property tax, people with fuel-efficient cars don't pay a gas guzzler tax. With my proposal, people who use services pay the taxes that provide the services, proportional to how much they use. No one pays for services they don't use. That is about as close to a dictionary definition of "fair" as I can imagine. Progressive: It's a consumption tax, so citizens who consume more services will pay more, and it's reasonable to suppose that citizens who earn more will consume more. Simple: No accountant or lawyer needed. No tax infrastructure. No tax code. Anyone can choose to provide a service, and they are automatically granted a permanent, free, tax-collector license. No paperwork.
The definition of "use" becomes problematic too, however. Do I "use", say, the schools in my home town, even though I don't have kids? The schools locally inflate my property value, and schools generally help keep the economy moving. One could easily make similar arguments about other infrastructure, as well.
If you don't have kids, you don't use the schools. That's common sense. If there is any disagreement, the school administrator can send you a bill, you can refuse to pay it, and the school administrator can refrain from making any special effort to inflate your property value. Inflated property values mean you are punished when you buy and rewarded when you sell. If someone builds a good school while you live there, you're lucky, good for you. If they build a landfill, too bad. Unless you wanted a landfill. Can you give a stronger example for other infrastructure?
ANY infrastructure. You're encouraging free rider status by only paying for direct use. Roads, airports, and sea ports, for example, all contribute massively to our economy, which each of us benefits from, independent of whether we've ever leased a container ship.
Suppose we pay for roads with a general per capita tax, simply divide total road cost by population. Now there is no incentive for any individual to economize on road use. Everyone pays, but everyone behaves like a free rider. Suppose instead we pay for roads with a tax on gasoline. Now people who use roads more pay more. This seems more fair. People who don't use roads much don't pay much. But it's not perfect; people who buy gasoline for lawn mowers still pay for roads. People who drive electric cars will be free riders. Self-supporting toll roads provide incentive to build and maintain roads where people want them, with no free riders (possibly with exceptions: free use for toll road employees, discounts for mass transit). If I don't use the roads myself, but benefit because my trash removal company uses the roads, the trash removal company will include a portion of their road tax in my trash bill. Your "contribute to the economy" language is vague. If someone benefits from a service, they ought to be willing to pay for it. It might be difficult or impossible to require payment, such as a bakery that can't bill neighbors for the pleasant aroma. Maybe that's not a good example. Can you think of a better, specific, example?
But isn't our current system--a combination gas taxes, vehicle registration, and general tax funds--a reasonable way to hedge against free riders? It sets a kind of low and high bar for usage. There are a number of examples outside of transportation that use this type of hybrid model (public universities, for one). I think they work better in some areas than others. I would agree if you said that many of these public subsidies (for transportation, e.g.) can work to the benefit of corporations at the expense of payers. It would be an interesting world if the price of a t-shirt at a big box store included the full cost of shipping as well as workers' heath care and housing. I don't know if that world would be better or worse for more people on average.
A free rider is someone who can increase consumption of a service without incurring additional cost. My proposal aims to link consumption and cost as closely as possible, minimizing free riders. I think any alternative would increase free riders. Consider vehicle registration. It's typically not a flat rate per vehicle. Antique vehicles and motorcycles get a discount. Heavier vehicles and commercial vehicles pay more. These crude adjustments make the registration fee more closely match the usage cost the drivers will impose on the roads. A gas tax is a closer but still approximate measure of road usage. A general tax is completely disconnected. Why should a New York City resident without a car subsidize Alaskan highways? No system will be perfect. A kid on the back seat is literally a free rider (unless a toll operator charges for passengers). But the weight of an extra kid does not add much wear and tear to a highway. I think that the incentives work out best when those who have a stake in the operation make the decisions, rather than distant planners making inflexible one-size-fits-all rules for others. I believe the price of a t-shirt does include the full cost of shipping (how else would the container ship lease get paid?). If the t-shirt factory worker pays for housing or health care with their salary, then the price of the t-shirt also includes these costs. Of course public subsidies can work to the benefit of corporations at the expense of taxpayers; do I need to say it?
"fair": I meant it as no one is cheating the system (rather than the system itself is fair). IE if there's a tax for smokers only, it's ok that non smokers don't have to pay it. On the other hand, if some smokers don't pay that tax because they found a way around it, then that's unfair to the other smokers who are paying. For your proposal to be fair, they'd need to be a way to bill for all goods and services, which may be technically hard to do (how do you implement sidewalks tolls in a way that it can't be bypassed by walking on people's grass?) . "progressive". The more money people have the less they spend on goods and services and the more they invest. Basically if you make 1M and spend 100K on goods and services, you'd only be taxes on 10% of your income vs someone making 50K who's going to be taxes on 100% of income. This problem is amplified with compound interest on investments (rich getting richer faster). My proposal tries to resolve this with an investment tax, but it might be better to keep the capital gain tax instead. . "Simple": For public goods (sidewalks, military, etc) i don't think it'll be easy to track who owes what.
5% tax taken out of every paycheck. 10% tax on every capital gain. (Sell $1000 of stock? Pay $100 in taxes.) This has the added benefit of there being no "Tax Day" April 15th (yay! my Mom gets her birthday back!), and no tax preparations, etc. Cash transactions are still on an honor basis, of course, but the big purchases - houses, cars, etc - can be easily tracked and discovered in an audit.
So you are saying I need to win the lottery so I can buy lobbyists to lobby for making April 15th my mom's birthday again? Ok. I can do that. BTW - What shittier thing could you do to a 9-year old than changing tax day to their birthday? My poor mom... (They changed it from March 19 to April 15th in 1955, when my Mom was 9.)
Sales taxes (compared to income taxes) are inherently harder on the poor than the rich - the poor spend nearly all their income, so are taxed on nearly 100% of it. The rich are taxed less, according to how much of their income they actually spend. So naturally, the rich will always love sales taxes in favour of income taxes. I'd prefer a govt that didn't tax citizens at all on their income OR their spending, as much as possible. Once upon a time there was no income tax in the USA at all.
I like the idea of distinguishing income, so that there is something like a concept of 'labour income', with a lower tax rate (as opposed to capital-gains income, pure interest income, benefits, inheritance, stock bonuses, whatever). For the poor, most of their income is labour income, so it's a natural way to ease the tax burden of the poor. Would probably need a maximum upper limit for it also, to prevent abuse of the lowered 'labour income' rate.
Agreed. My point is that if financial goods were also taxed, that would affect the rich (which have most of their wealth in these) more than the poor. The only thing that wouldn't be taxed is the accumulated interest... until it's used to buy more goods.
https://en.m.wikipedia.org/wiki/Tax_protester_constitutional_argumentsI'd prefer a govt that didn't tax citizens at all on their income OR their spending, as much as possible. Once upon a time there was no income tax in the USA at all.
I dunno, what if a middle class person buys retirement mutual funds, and they depreciate? You had to pay tax, in addition to losing your retirement. We already tax income from financial products, 'capital gains tax'. That seems reasonable to me (though I think It's far too low).what if the sales tax applied not only to physical goods but also to virtual and financial products?