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Comment by njarboe | Hacker News Reader

The problem is that under the current tax scheme in the US people are taxed on their total income and companies are taxed on their profits. This is a huge difference. So rich people, who can have companies do what they want, get taxed very little and people, with just income, get taxed a lot. I think if we could just get rid of the income tax somehow (like have a land tax instead) the country would be so much better off. You could just work for whoever you wanted without any paper work and people could just pay you. Rich people would have no need to create all of these companies and foundations. Everything would be much more free and efficient.

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> people are taxed on their total income and companies are taxed on their profits. This is a huge difference.

Arguably not. The progressive tax bracket system means that a bare minimum amount of money (up to the lowest threshold) is available basically tax free to cover necessities and then everything above that is effectively profit for an individual. Living in an expensive house, eating expensive foods, raising a well resourced family aren't really expenses in the sense that businesses have expenses. If they were like business expenses people would try to minimise them, whereas most people I know actually try to maximise those costs when you look at what decisions they make. I've never convinced anyone with arguments that they should move into a cheaper house to save money. In that sense, both systems are philosophically the same but people have very low necessary expenses.

Almost an aside, but taxing people only on their savings would be truly bizarre. Someone measurably adds more to the economy than they consume and they are the ones who get shafted with tax? Ethically a case could be made, but practically the incentives are so nutty I'd hope it doesn't warrant serious discussion.

Taxing corporate revenue rather than profit would cause price increases and act like a consumption tax. Certainly possible, but that is a regressive tax policy and generally frowned upon.

> Almost an aside, but taxing people only on their savings would be truly bizarre.

It happens all the time, it's called property taxes.

Also, inflation. If the government does something that increases inflation (like printing money), then they're essentially taxing savings.

> Also, inflation. If the government does something that increases inflation (like printing money), then they're essentially taxing savings.

Not exactly, if the government prints money, then the value of the dollar will decrease, but it the value of other assets will increase to adjust for the lower dollar value. So while printing money can be thought of as a tax on cash savings, it's not a tax on all assets (e.g., stocks, property, etc.).

Taxing savings encourages spending and helps the economy flow. When money is held outside of the economy it (say under your bed) it kills any benefit and creates depressions.

Taxing savings makes sense over income. Why tax someone producing, removing the tax encourages more work performed. We tax income because it is easier. We tax the estate in death because everything is collected and recorded. In Roman times they sent a tax collector who would go through the home to find valuable objects to pay taxes (tax on savings).

It is not as wierd as it sounds. It's impossible to implement in our society before death and taxing payrolls and self reported income is a lot easier.

> Taxing savings encourages spending and helps the economy flow. When money is held outside of the economy it (say under your bed) it kills any benefit and creates depressions.

But that is a bad goal - we don't want to optimise economic flows, we want to optimise quality of life and standards of living.

The goal in this era of plenty shouldn't tend towards everyone teetering towards bankruptcy and wage slavery so that the politicians can talk about how the GDP is 2% higher. Everyone should have a reserve of real wealth in case they fall on hard times and the bigger the reserve the better as far as I'm concerned.

In my lifetime there have been a constant stream of inflationary collapses and a noticeable lack of problems caused by deflation. That theory is very popular with governments because it justifies the creation of money on a grand scale, but it has a certain lack of evidence. We've seen communism tried more often than deflation.

> But that is a bad goal - we don't want to optimise economic flows, we want to optimise quality of life and standards of living.

Heh it's a great idea for the powers collecting that spending though ;)

It helps wasting resources; why save and pay it to the government when you can buy more than you need, producing more CO2 in the process and wasting limited resources? Long live the waste.

> If they were like business expenses people would try to minimise them,

Perhaps in some cases, but many companies I know have "spend it or lose it" policies wrt budgets, so often money gets spent just to justify being able to spend more next year. And I've worked with a couple small companies that tried to spend more (legitimately) to try to avoid having as much profit to pay tax on. So not every business tries to minimize cost (or not as efficiently as you might assume).

It seems weird that you complain that the wealthy are under-taxed and then propose we switch from an income tax to a land tax which shifts a large portion of the tax burden from the rich to the middle class and poor.

Also the reason for the formation of most of the companies mentioned in the article is liability reduction more than tax reduction.

LVT is indeed really good, but the transition is awkward. Many proponents don't really buy being poor with valuable (not farm) land as something deserving protection, and frankly think it's mainly bs boogieman thrown out by actually rich people. But yes, given the sorry state of the US we can't really afford politically or policy wise to fuck over yet another group of for people for a 10 year transition.

But the fix is easy. Wealth tax and/or UBI smooths it over and then we are set. You lost your family home, poo poo, but now get a nice stepand and can also afford appartments near where you work. You'll walk or bike more, be healther including mentally and socially (not isolated among neighbors richer than you in a dust trap), and spew out less C02.

You may be a fan of replacing the income tax with a consumption tax.

https://en.wikipedia.org/wiki/Consumption_tax

Sales tax in the US is generally the most regressive tax we have, so I'd say no. Are you suggesting something different?

That would be much, much worse. It would be the exact opposite of what the GP comment suggested.

> It would be the exact opposite of what the GP comment suggested.

Huh?

That comment suggested

> The problem is that under the current tax scheme in the US people are taxed on their total income and companies are taxed on their profits.

and

> I think if we could just get rid of the income tax somehow (like have a land tax instead) the country would be so much better off.

Replacing the income tax with a consumption tax follows directly from both of those points. As to the first, it replaces the system where companies are taxed on profits and people are taxed on revenue with a system where companies are taxed on profits and people are taxed on profits. As to the second, obviously, it gets rid of the income tax.

What were you thinking your GP comment said?

> people are taxed on profits

Setting aside the oddity of talking about profit of people, given constant income, you pay less consumption tax as your profit goes up.

Consumption is expenses, profit = income - expenses.

Rearranging. Consumption tax = y * expenses = y * (income - profit) where y is the consumption tax rate. So, as profits increase, expenses decrease and consumption tax goes down.

> Setting aside the oddity of talking about profit of people, given constant income, you pay less consumption tax as your profit goes up.

> Consumption is expenses, profit = income - expenses.

No, a person's profits are their consumption. Savings are not profits -- they don't benefit you at all.

There's a chain going like this:

Company spends money so that company receives (more) money so that person receives money so that person can spend money.

The goal of the company is to accumulate money for someone else and that's how its profits are measured. Profit is money the company loses by paying it out to its owners. (Money the company loses by paying it out to non-owners is "expenses".)

The goal of the person is to spend money on things it can actually use; for the person, money is an accounting tool, not an end goal. But we can identify profit the same way. Money that you lose by paying it out to yourself ("consumption") is your profit; savings is just money you might one day allocate to profit.

From a values perspective I like this approach. I don’t like that other people get to determine how much of the capital I pull in gets to be mine after all.

On the other hand, I don’t think it would create much tax revenue.

We only gave our government the right to institute an income tax thanks to the idiots who banned alcohol. Before that the feds relied on alcohol taxes to survive.

Play stupid games, win stupid prizes.

https://www.heinzhistorycenter.org/blog/at-the-history-cente...

> I don’t like that other people get to determine how much of the capital I pull in gets to be mine after all.

Let me paraphrase Adam Gopnik's recent book, "A Thousand Small Sanities: The Moral Adventure of Liberalism": When you talk about "the capital I pull in," you're risking celebrating the driver while taking cars, roads, and gasoline for granted. [0]

See also Elizabeth Warren's famous talk in her first Senate campaign: "There is nobody in this country who got rich on their own. Nobody. You built a factory out there - good for you. But I want to be clear. You moved your goods to market on roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn't have to worry that marauding bands would come and seize everything at your factory... Now look. You built a factory and it turned into something terrific or a great idea - God bless! Keep a hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.” [1]

And of course Barack Obama's correct statement, intentionally taken out of context by the right: "You didn't build that" (referring to the roads and bridges that businesses depend on). [2]

[0] https://www.amazon.com/Thousand-Small-Sanities-Adventure-Lib... (not an affiliate link).

[1] https://www.goodreads.com/quotes/439207-there-is-nobody-in-t... — also YouTube: https://www.youtube.com/watch?v=60fQCDqXfq0

[2] https://www.wikiwand.com/en/You_didn%27t_build_that

Correction: It wasn't Gopnik I was paraphrasing but Binyamin Appelbaum, The Economists' Hour [3]: "[Milton] Friedman chose to see the role of individual initiative rather than the context of public support. He celebrated drivers and took roads for granted."

[3] https://www.amazon.com/Economists-Hour-Prophets-Markets-Frac...

Wealthy people don't consume more goods than average people.

They do IF you consider all out-flow as taxable goods/services... i.e. E.g. estate, investments, property, employee wages, land (would be calculated differently...not on spend but on just ownership), purchases. Investment firms would pay the tax on money paid out to investor, so it'd need to put that rate in there somewhere.

If you combine this with UBI + Single Payer + Free College -- then everyone will be able to afford the taxes they will pay on goods/services at the store/etc.

If the lowest safety net keeps just about everyone around 35-45k with medical safety, then they can probably afford 5-10k in VAT fees, and if they no longer peg benefits to companies -- people have more fluidity about where they work based on the fact they aren't going to lose their medicare for all.

This also means those who are fine not working and living on UBI ALSO drive up the rate of pay for those who DO want to work because supply/demand of workers will go down.

Yes they do.

They don't consume more goods, they consume goods of much higher value (ex: luxury items and fine cuisine) and services so in the end they will pay much more taxes. What else do you think they spend the money on, if not goods and services?

Equities (stocks), fixed Income (bonds), real estate, commodities, futures and other financial derivatives mainly. Basically they spend their money on investments.

Spend and invest in the same sentence: not good.

Asset tax in combination with negative interest rates is the most equitable model in a capitalist society like ours. Use the proceeds to fund a universal basic income.

This is a complete nonsense: it is mixing an economic model with a taxation, gets to social ideas that are anti-economic (why bother having an economy at all if you do redistribution?) and throw the magic word "equitable" in it, all without any supporting argument. It is amazing, better crafted than demo scene.

What do you think would happen with an aggressive capital gains tax (including on unrealized gains) and negative interest rates?

I'd expect movement of capital away from that economy and a 20+% recession in that economy.

Where would capital move?

If that is the only argument, it does not hold.

I'm not sure if you are replying to me or the parent but I'm asking a genuine question. If capital needs to move from investments where would it go?

Anywhere? Panama, Cayman Islands, bitcoin, foreign real state, gold... take your pick. Wealth is pretty fluid these days, even for people who live under Chinese-style capital "controls".

Tax evasion is not a valid answer. The others are issues though gold would be subject to the same taxation. Moving money abroad is a major issue but its already a major issue (see apple in Ireland or Chinese in Australia).

Consumption taxes are income taxes with a loophole for whatever you exclude from the consumption side of thing. Exclude land purchases but not rent, and people have a huge incentive to buy land. The stated loophole is investment, again that’s equivalent to allowing people to deduct investments from income tax which clearly favors the wealthy.

In the end countries spend a high percentage of GDP on thing people actually want. Everything after that is just deciding who pays for it.

PS: Consumption taxes also push people to vacation and retire in different countries.

A consumption tax also gives the working poor tremendous levers to better their circumstances. They aren't taxed on necessities for food and folks who make under a specified amount don't pay the tax at all. Most of the potential issues you pointed out impact any taxation system (i.e. carve outs for the wealthy) because they're political/power problems.

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