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> - It would close all the loopholes megacorps/wealthy individuals use to pay less tax. You cannot avoid spending money in the place where you operate.

Yeah, it would "fix" this situation by just having them pay _less_ tax without needing a loophole. The percentage of income/wealth that someone spends decreases as wealth increases, so in other words the poor pay proportionally more under your tax scheme.

I think this is fundamentally a regressive idea. Currently the very poor pay zero (or effectively zero) income taxes. No matter how you structure the sales tax, you cannot go below zero. (I think negative sales tax is not actually realistic, nor particularly progressive.)

A system that only taxes spending fundamentally has problems in that the richer people can afford to save and invest.

Could you explain a bit more how negative sales tax is unrealistic? We already subsidize things we want to encourage.

> A system that only taxes spending fundamentally has problems in that the richer people can afford to save and invest.

That is an existing problem inherent to any tax system. It's just saying "Rich people can afford to not spend all of their money". I don't see how that's fundamental to taxing only spending.

One problem is that it encourages using items with negative sales tax for other purposes with value lower than the true cost (i.e. it can induce inefficient demand).

There are similar issues in agriculture subsidies and price regulation. E.g. High fructose corn syrup is probably as popular as it is because corn has been subsidized and cane sugar has a regulated (high) price. It's kind of like an inefficient arbitrage between physical goods to avoid taxes.

>That is an existing problem inherent to any tax system. It's just saying "Rich people can afford to not spend all of their money". I don't see how that's fundamental to taxing only spending.

If you taxed only assets it wouldn't be a problem. Mo money mo taxes.

Whether you want to tax predominantly assets or spending usually reflects which side of the capital divide you see yourself identifying with - predominantly a recipient of unearned income (e.g. landlord/FIRE) or a payer (e.g. renter).

> more how negative sales tax is unrealistic

In this proposal, sales tax is the only tax. You can't run a government without money.

> Could you explain a bit more how negative sales tax is unrealistic? We already subsidize things we want to encourage.

Lets say apples have a -5% tax rate, and cost $1. Every time I buy an apple from the store, I pay $0.95 (the government pays the rest, which is a problem in and of itself). I can sell that apple for $1, and the government basically just paid me $0.05 for selling an apple.

The problem with the government paying that $0.05 is that sales tax is assessed at time of purchase, but the government isn't there to pay their part. The grocery store basically has an IOU from the government. 5% may be higher than the grocery store's margins, which means the customer payment is actually less than the good is worth, so the grocery store's ledger actually goes down for that sale until the government pays back their part.

And then you have to deal with fraud. Nobody wants to overreport their sales tax, it costs them money. If you can make money off sales tax, people will filing fraudulent tax reports, and I really don't want the IRS having to track how many apples the grocery store actually sold. I'm sure money launderers would also find a way to use it to buffer their costs.

Subsidies probably still have fraud, but it's a smaller number of entities to work with. We can also budget for it because we determine the amount. I can give a budget to the subsidy, but I can't tell people to only buy 10,000 apples next year.

An instance of that fraud is that re-selling would generate money. I buy that apple for 95ct. Sell it to the next supermarket for 98ct. They sell it to a customer for 100ct of which the customer pays 95ct. Goes to the next supermarket etc etc. Today you'd just accumulate more and more tax so nobody does that. With negative VAT this loop is now generating money.

It could be coupled with a hefty UBI. No need for means-testing. If everyone got e.g. $10,000/yr, that would completely offset VAT for people who don't buy much. People who spend millions every year wouldn't even notice it.

I'm not opposed to the idea of UBI, but it doesn't really solve any problems here, it just adds massive political and logistical complexity that would essentially doom any possibility of reforming the tax code.

In this thread, we're discussing how to ameliorate the regressive aspects of sales taxes. Poor people spend most of what they have, so they are subject to proportionally more sales taxes than rich people who spend very little of their vast accumulated wealth on goods subject to those taxes.

The initial, flawed response to this issue would be to construct some "massive political and logistical complexity" in order to track everyone's income and spending and family situation and lots of other stuff too and calculate their VAT refunds based on some formula. The much simpler solution is to just give everyone the same amount of money. Poor people will spend some portion of it on sales taxes, and they'll use the rest for other purposes of their choosing. Slightly richer people will spend all of the UBI on sales taxes but will come out even. Slightly richer people will be able to offset some portion of their sales taxes. Really rich people won't even notice they got a UBI.

Perhaps you really meant that "massive political and logistical complexity" is required to get anything through the legislative process? After all, the more complicated it gets, the more places lobbyists can hide loot for their employers.

One of the things that worries me with UBI is that the somewhat-better-off people without a moral compass- for instance, slumlords- will raise rent and eat really far into other people's UBI because they know everyone gets it and needs a place to live, thus keeping them from being able to save up to afford even a modest "starter home". Like GPU scalpers, they provide very little value and charge a lot for their services. There's a small group of people in my town that really do the poor in via rent already without so much as a care about the quality of housing they provide, and I fear that one of the unintended effects of UBI is that the slumlord class will get a ton more money without doing anything to improve other people's lives.

TL;DR: my fear with UBI is that unscrupulous people will do unfair things like significantly raise rent to eat into other people's free money thus leaving the poor in the same spot, more or less.

It's true that the spending of the poor tends to be concentrated on the "basics": food, housing, transportation, childcare, utilities. Such a situation is inherently subject to more pricing risk. Relatively wealthier people might forego cable TV for six months in order to pay for unexpected car repairs, but that wouldn't be an option for someone who doesn't have cable TV in the first place. Still, your objection has it backwards. Yes, the poor face a relatively limited range of choices in how they can live in an arbitrarily unfair society like ours. However, increasing the income of the poor increases their choices, period. We don't know in advance how exactly they will react to this increased choice, but it's extremely unlikely that their reaction will be to give all the extra money to the same asshole landlord. A more reliable car might allow a family to live in a completely different neighborhood. Working a single job instead of two might allow a parent to spend less on childcare. And so on. Poor people are humans with imagination, not rent-payment-maximizing automatons.

I don't claim to know anything about your town, but I've lived lots of places and in general, in order to really fuck people over the bastards first have to limit their freedom somehow. Are there only certain parts of town in which the poor are allowed to live? Has public transportation been limited in arbitrary ways? Do zoning regs or HOAs enforce impractical restrictions on housing? Would it be OK if your neighbor parked a mobile home and camper behind her house for her recently-divorced sister-in-law plus five kids? What if her nephew and his girlfriend also moved out back?

Fair tax, a proposal for replacing current taxes with a federal sales tax, has already come up with a solution for this. Under its plan every person receives a check to cover the sales tax on spending up to the poverty level.

How do those plans tackle the problem of heterogenious tax systems internationally? No tourist is going to visit you if the restaurant visit costs 3x as much as in their home country (assuming similar living standards in both countries). Those tourists would effectively be taxed twice. Income tax at home and then again full charge on the steak on vacation.

The proposed sale tax rate(23%) would not differ too much from that VAT rate that Europeans already are used to paying.

Here in NZ we have a GST plus income tax - there are 3 tax steps, there are NO exemptions. Most people don't need to file a tax return, if you have only 1 job your employer will pay exactly the correct PAYE. If you have multiple jobs (or if you want to anyway) you can file online, it's 2-3 pages. If you don't do anything the IRD will run your taxes and if necessary send you a bill, or a refund (with interest).

I run a small business, I do my monthly PAYE in a simple spreads sheet - one line, type in the gross income out comes the numbers to include in the online filing web page including PAYE, and 401K equivalent. Doing the same in California was a nightmare.

We have no need for TurboTax or it's equivalent

> Here's my dream [...] The only tax is a Sales tax/VAT/GST.

Ok, I'll share mine: the only tax is on pollution and/or scare resource usage.

It's weird that we tax anything that's considered "good" in my opinion. Taxing housing, income from labour, consumption -- who came up with these shit ideas? Tax only, ONLY, what is considered bad (or should be reduced to a minimum), mainly: pollution. And the market will organize itself accordingly; optimize for all of us to survive a little longer on this planet (instead of exploiting it ASAP).

Fully agreed! We need to tax the hell out of such externalities.

Perhaps the main tax of the whole humanity should be a carbon tax, at least in the 21th century.

Both together would be good. Tax externalities (=carbon tax etc.), and tax consumption (=VAT).

You can eliminate tax returns for most people by getting their employer to do it for them, which is effectively how the UK PAYE system works. Only those paid more than 100k, the self employed or others who want to claim certain tax incentives have to file what's known as a self assessment.

In the US our employers also submit our taxes to the govt. But because they don’t have enough information about our lives (mortgage payments, donations, savings incentives) they send the wrong amount. In April we “file our tax return” and pay/have returned the difference.

Interesting. Mortgage payments wouldn't attract tax relief in the UK, and everything else has a nil rate band, so only those with large savings have to declare. Charity donations are dealt with through a scheme called Gift Aid - essentially, the charity claims the tax back.

A wealth tax. All assets and cash need to be properly valued and then that value taxed. I agree with the sibling comment and also with past discussions where a wealth tax is the only non-regressive (not-keep the poor down) tax code.

I'm not sure that would work as simply as that. Imagine buying a volatile stock, say, TSLA at $100. This then skyrockets to $1000. You're now taxed on your wealth at that price point. Then it immediately crashes down to $120. All this while, you're just holding the stock but paid taxes on a non existent value.

I haven't thought this through, but could that actually be a feature?

I'm not sure it would - it seems like this would discourage risk taking. Owning stock in a startup would be a terrible move in this case.

Still sounds like a feature. The unicorn chase for value explosion is not a positive.

_Most_ capital is not put at "risk".

It would certainly discourage risk taking on highly volatile instruments, and I'm not so sure that's a net contributor to the economy.

Perhaps substitute the (inflation adjusted) price you bought the stock at? Or maybe something like a rolling average of the past month/year?

This is a solved problem. For taxation purposes, just integrate over all price points in the taxation interval. In other words, average it.

Wealth taxes are extremely inefficient and ineffective at actually generating revenue.

It's different when you

1. own the largest market 2. Own the world reserve currency 3. Have a means of charging exit taxes

One benefit of markets is price-discovery. But if you're not participating in a market, determining price is akin to shaking a magic 8 ball. It assumes a Just Price, which is a heuristic and a fiction.

Also, quality of living is determined by income, not wealth. Fresh retirees are generally wealthier than other age-groups because they've saved for retirement. But that doesn't mean they consume more. Also, consider the citizens of the Netherlands. They enjoy a comfortable existence while servicing an enormous amount of debt. If wealth were the primary determinant of quality of life, you'd think the Netherlands were as as destitute as Somalia.

Wealth tax has nothing to do with markets and Nobody whants to tax the level of wealth for an ordinary retire silly. That's a straw man.

The American capital, legal, and tax structure collude to reduce wages, whereas the Dutch system incentivises responsible 'market based solutions'

The only people who want to live with a somali gov are gop

> Wealth tax has nothing to do with markets [..]

(Genuine question) how would one determine the value of something for taxation purposes if there's no market involved?

The market bit comes in when you have stuff like artworks. You have a canvas with splodges on. Is that worth $0 or $1m? Who knows till you sell it?

Or startups - is your loss making one a 0 or a $1bn? You could have work arounds for tax but it complicates things.

The retiree example is intended to demonstrate that a wealth tax is inherently perverse, regardless of who is targeted. Savings are just deferred expenditure and debt is just expedited expenditure. When you tax wealth, you expedite consumption.

Another way of thinking about this: A wealth tax is like inflation, except assets are also devalued alongside your savings. Which means the wisest strategy is to consume now, save nothing, invest nothing.

50 dollars tomorrow may be more useful to you than 100 dollars today if today you'd only buy useless crap for it but tomorrow there is a brilliant investment opportunity.

I highly recommend that people look into Islam's Zakat laws. Zakat is a form of "tax" if you will, but is much superior and has been proven to work historically. Money that has been sitting in your account unused for a year is "taxed" at 2.5%. Things like livestock and produce have their own rates.

Things still get complicated there. What is the value of a car? I'm not planning on selling mine, so I have no idea. Do I just Blue Book it? If I key the shit out of it every Christmas and then have it repainted in January, can I knock 40% of the value off? It might be cheaper to just have it repainted.

What's the value of a painting? You could use the price I bought it for, but what if we just swap paintings instead? You know, I give you this fancy painting, you give me some Goodwill shit and you pay me a $100k "finders fee".

What's a yacht worth? What are super fancy houses worth? One of Mike Tyson's old mansions is still abandoned, so I assume it was worth nothing since they couldn't sell it.

Properly valuing things is hard. Wealth taxes are also regressive, in a way, because poor people are much less likely to have access to financial instruments that will return greater than the wealth tax rate. The poor and the middle class are far more likely to have their money in functional investments (homes, cars, etc) than they are to have them in something that generates profit.

So you'd still have to just not assess the tax on assets under the value of a reasonable home and car, at which point we're basically just back to what we have now, which is carving out a loophole for the poor.

> Won't this disproportionately tax the poor? - Firstly, the existing tax code already does.

I used to think this because it's often said, but learned it's not true. This sums it up:

The top 50 percent of all taxpayers paid 97 percent of all individual income taxes, while the bottom 50 percent paid the remaining 3 percent.

The top 1 percent paid a greater share of individual income taxes (38.5 percent) than the bottom 90 percent combined (29.9 percent).

The top 1 percent of taxpayers paid a 26.8 percent average individual income tax rate, which is more than six times higher than taxpayers in the bottom 50 percent (4.0 percent).

https://taxfoundation.org/summary-of-the-latest-federal-inco...

How do any of those statistics refute that statement without supplementary data on income/wealth (or whatever else you're using to measure the proportionality of tax)?

I don't understand your question about proportionality of tax, because there are two ways to think about proportionality and the stats I cite cover both.

Take another look at the last point I cite, I THINK it goes to what you're asking: the richest 1% paid 26.8% of they income in taxes. The poorest 50% paid only 4% of their income in taxes.

Let me know if your question is something different.

Sorry, I must have completely blanked and missed that statement. Regardless, it is compared to AGI, which is possibly one of the worst possible metrics to use.

Firstly, AGI is post-deductions, so people who play games with their taxes show up as paying more.

Secondarily, and more importantly, income is a trash metric anyways. Poor does not mean low income, it means low wealth. In your data somebody who inherits a ton of money but has 0 income counts as "bottom 50%". Rich people have a disproportionally lower income vs wealth.

I am not sure these percentages include indirect taxes or are just direct. Regardless, the top 1% wealthiest accumulate wealth which is not declared as income and therefore that percentage is on their declared income and not on wealth. For poor people their income is their wealth. Finally, for the 1% even basic things that would require income for the majority of the population, such as travel, food, accommodation are routinely not funded by income, making the comparison even worse as they have extremely more flexibility in optimising their income vs investments and their exposure to indirect taxes even if they are immaterial to them.

Also something I thought based on the statement above. Poor people have at best a converging to 100% tax on their wealth, assuming that taxes collected would be savings. If they were to be consumed it’s even worse as taxes eat into their survival. Edited to make it converging with the assumption they might still be saving a little.

Counterpoint (note that this is tax relative to wealth, not income):

> The big picture: The very richest Americans pay much less tax, as a proportion of their total net worth, than the rest of us.

> By the numbers: The bottom 99% of Americans pay about 7.2% of their net worth every year in taxes, per Warren. The top 0.1%, by contrast, pay about 3.2%.

Source: Section 3 here: https://www.axios.com/newsletters/axios-capital-d213524e-b2f...

Agree - there are different ways to slice this, but at the end of the day, should we?

Let's say you and I start off with zero wealth, but we both graduate with a good degree, both get high-paying jobs and both make the same amount of money.

We also pay the same amount of taxes - which sounds fair, right?

Lets say we both make 150K a year, but I spend it all on my living expenses/fun while you are able to live on 50K and save 100K every year.

In 10 years, you will have over a million dollars in savings/investments while I lets say managed to save 10K.

We still make the same salary and pay the same tax but our wealth is grossly unequal. I pay 100X tax-per-wealth than you do. That sounds horrible but in the above example is totally reasonable.

Obviously the Warren Buffet example is a bit different than that but - he pays a ton of absolute $$$s compared to you, me, and anyone else, why is his total wealth an absolute necessity to look at?

> Why is his total wealth an absolute necessity to look at

Because money needs to move. Having it sit somewhere in a bank account is not something you want to encourage (as a government).

His wealth doesn't sit in a bank account, it's invested in his companies.

That kind of wealth is never just cash in an account. It's spread across thousands of assets and investments.

For example, they are often LPs that invest in VC funds to give them cash which is then given to startups to build a business.

This type of example pervades online discussion about taxes but is based on a ridiculous hypothetical and is close to victim blaming people for being poor.

In reality, factors outside of someone's control (ex: parent's education and wealth) are greater predictors of their wealth than _any_ decisions they make. I am ok with allowing some people who make irresponsible life choices to get away with lower taxes if it makes the system as a whole fairer.

> why is his total wealth an absolute necessity to look at?

Your claim was that the poor aren't disproportionately taxed. "Poor" is a statement about wealth, not income, and income is an inaccurate substitute for wealth.

Income tax itself isn't the complicated part of taxes. I encourage everyone to do their own taxes by hand sometime. There are like 4 boxes for wage income and income tax, and 100s of boxes for everything else. And besides the boxes you do fill out, there is all the reading and calculating required to figure out you don't have to fill in even more boxes (e.g. in order to know if you have to fill in the AMT form, you potentially have to do all the AMT calculations).

I think the biggest single thing that would simplify the tax code is removing the separate capital gains tax and just counting it all as income. There is significant complexity in the tax return to calculate everything independently and to show that your capital gains aren't really income. You could eliminate Schedule D, Form 8949 (which you have to up to 4 times), and the Capital Gains/Schedule D worksheets to figure income.

HSAs are also super painful. E.g. CA doesn't respect the tax-exempt status of HSAs, so you have to add the HSA back into your income so they can tax it. There are also a lot of bookkeeping requirements for relatively low amounts of money. In practice, they aren't very useful since the fees are high, the returns are low, and their function is redundant with insurance (i.e. paying premiums now to cover large future expenses).

In general, there are a ton of random little exemptions and extra taxes that you might qualify for and it just takes time to figure out if they apply to you. E.g. Form 8959 (Additional Medicare Tax) is a 0.9% tax for income over a certain amount. They should have just adjusted the income tax graduations in an equivalent way. Form 8960 (Net Investment Income Tax) has a similar problem. CA gives a $60 renter's credit if you make under certain amounts, which is just too insignificant to matter (e.g. 0.3% of $1500/month annualized).

> biggest single thing that would simplify the tax code is removing the separate capital gains tax and just counting it all as income

That's okay during times like ~1990-2020, a time of wonderfully low dollar inflation. The justification behind the long-term capital gains rate is this: during times of high dollar inflation, taxation on capital asset values turns into an outright tax on investment.

If the dollar is inflating rapidly then an investment which simply maintains its value in real terms -- neither gaining nor losing real value -- will see its value in dollars increase and will therefore be taxed, heavily. The lower rate for capital gains tax was in recognition that not all of that gain in nominal value was real income. All of the major reductions in the long-term capital gains rate (i.e. reduction of the rate, shortening of timespan for "long term", and increase/removal of cap) occurred after highly dollar-inflationary periods (1934, 1942, 1978-1981).

Without a lower capital gains rate, during times of high dollar inflation the wealthy will shift all their money into non-fungible assets (real estate, artwork, patents, Persian rugs, domain names, antiques) which aren't fungible commodities with liquid markets and therefore can't be marked-to-market or taxed until sold. This kind of economy-wide, sudden, and simultaneous disinvestment would be a catastrophe for the economy.

Not to mention the resulting real estate boom would make the homelessness problem an order of magnitude worse in a matter of months. When your money is losing value every day, buying up every apartment in sight, jacking the rent to the moon, and evicting the tenants (so it can sit empty and maintain value without any management effort) is, unfortunately, a great strategy.

Note that the 1990's were a boom time for the US (Cold War peace dividend), and from ~2000-2020 we had a massive onlining of cheap Chinese labor providing a deflationary counterpressure to our outrageous money-printing escapades. All the cheap Chinese labor is now fully online and "Fed go Brrr" is in permanent COVID-hyperdrive, so the party will end real soon now.

> This kind of economy-wide, sudden, and simultaneous disinvestment would be a catastrophe for the economy.

I don't know, it sounds like a great opportunity for the non-super-wealthy to buy shares in productive assets at a discount. Haven't all the prudent people in the room spent the past 8 years grousing about how poor the P/E ratio of the S&P is?

It's only a "great opportunity" for people who don't file income tax returns.

Those people generally end up in prison. The few who don't are not economically significant.

In the long run, you, as a human being who works, retires, and dies, are better off owning a larger share of productive assets, even if you have to pay more taxes on them, than owing fewer productive assets, because the price to buy them is too damn high.

Not to mention that as I get older, I expect my income tax bracket to drop. I'd rather buy productive assets cheaply now, and deal with the tax consequences, than be cut out of buying productive assets, period.

It also creates a problem where you have countries who are close together people crossing the border to shop where taxes are cheaper and then the country where they live not getting those tax dollars (example Canada USA)

So, this is basically a tax on consumption.

Not a bad idea per se, but regressive, as many pointed out. However, in conjunction with a UBI it might make sense, and be progressive.

another con is: It's very hard to figure out how high your personal tax rate is if you don't track all your spending. I guess it's less of a problem for you guys over the pond, but at least in countries like Japan and Germany where at least 60-80% of all payments are done with cash it's near impossible to know unless you track your spending by hand.

I agree with you that VAT would be cool to have as the sole tax, though.

> I agree with you that VAT would be cool to have as the sole tax, though.

I’m sure it’s cool if you’re worth a few millions or above. VATs are highly regressive taxes, though they are also consumption disincentives (essentially luxury taxes on a number of non-luxury, which is why essentials like food tend to be low-rated).

Why would you need or want to derive that number?

The reason that Taxes are complicated, is that the government wants them to be complicated. You can do without taxes (the government prints money, which is a tax on economic activity); or at a maximum print money + tax on big wealth accumulation which shouldn't affect the average guy.

The tax code is being used as a tool to funnel money through industries and as kickbacks to bureaucrats. A non-communist government can't force the population to do something (invest in this, build this, do that), but they can encourage/discourage it through taxes.

The tax code is not getting simpler any sooner.

Why would people keep using dollars if they were being inflated away and they didn't have to pay taxes?

Please enjoy your imminent crucifixion at the hands of the wokesters. It's what they do to people who use logic like that.

Do we really use that much time and money on tax prep? Sure, it seems like it during this time of year, but for the other 10 months I dont think about it.

And just forcing the bureaucracy into the businesses collecting a sales tax doesn’t reduce the burden, it just puts it out of sight for consumers.