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>It's worth noting that the UK, France, Germany, Sweden, Australia, and almost every other western democracy finance very large chunks of their governmental expenditures via high consumption taxes.

They do, but they also have higher overall tax rates, which includes an income tax. It's hard to point to European-style VATs as an argument for replacing income tax in the US when that's not how most European governments use VATs.

Consumption taxes - specifically if implemented as a VAT, as in Europe - are effectively impossible to dodge

Very funny. In fact, VAT is actually the easiest tax-dodge of all: just buy through a business and you can claim VAT relief, getting an effective 20% discount on everything. Say you are a graphic designer with your own Ltd company: you can now buy your Spider-Man DVDs, file them under "research expenses", and get 20% back (or whatever VAT is in your country). There are guidelines on what is acceptable, of course, but they are enforced only to a degree. Where they are strictly enforced, it's exactly because the system itself is otherwise wide open for abuse by individuals.

As soon as your business is large enough and diversified enough, abuse cannot realistically be detected -- your 3-people agency will indeed need DVDs for research... and printers, iPhones, vacuum cleaners, dishwashers... most small-firm owners and CEOs never pay VAT, as simple as that. VAT is a tax on fixed-income employees, an incredibly regressive tool. Its popularity is yet another cause of the widening disparity between have and have-nots throughout the continent.

In Israel, who runs a european-style welfare state, you are supposed to only get the VAT relief on stuff your business sells forward (the idea being that VAT is only ever paid once on every item).

People still abuse this, claiming e.g. that the Spiderman DVDs used for "research" ended up inside the final product and thus qualifies for tax relief -- but if they audit you, that might not fly, and a VAT audit is one of the easiest way to get in real legal trouble.

Guidelines vary between countries, but when you move from classic trading/manufacturing to services, they simply cannot be applied literally -- i'll need my computer to make software, but i won't sell it over, and i'll get vat relief anyway; and obviously i'll need an ipad or three to test my website, etc.

This is why vat auditing is so ruthless: because it's routinely abused by everyone, so the enforcers have to be harsh to maintain a shred of credibility.

I'm not saying VAT is bad per se (it's just another tax), only that is a clever way to tax consumption by fixed-income employees in a regressive way, which is really not what you want if you're trying to make the system fairer for, er, those fixed-income employees.

You're right and you're wrong. I think the delta in progressivism in each society is merely correlated with regressive VATs.

Being largely unable to implement the same degree of redistribution (remember also that income taxes are higher in Europe), I don't buy the argument that having more regressive taxation schemes ala a higher Sales/VAT in the United States would have a negligible effect on inequality.

I don't know about you, but 50%+ of my income went into consumption. Plus, any way you cit

I think your reply is cut off. :)

Anyhow, to the best of my knowledge, the best study on the subject is summarized in this graph: http://goo.gl/tmywx

What that shows is that no tax system has a significant impact on Gini. Switching from the most progressive tax system in the study (the US one) to the least (the UK one) would result in a change of Gini of around 0.02. If you rank OECD members by Gini coefficients, such a large change in taxation wouldn't even change the ranking; the US would remain at 4th most unequal. As such, I think it's fair to say that we can tinker with the tax system without fear of victimizing the poorest off. (And, also, that if we want to help the poorest off, we need to pull some lever other than tax policy.)

>(And, also, that if we want to help the poorest off, we need to pull some lever other than tax policy.)

Yes, 100% true. I agree: the resolution obviously lies in pursuing redistribution more aggressively.

I'm just uncomfortable with regressive solutions as a whole. If your answer is "it raises overall revenue which allows more redistribution" I may be persuaded, but again your correlation between Gini coefficients and the regressiveness of a given tax system feels specious at best.

I reserve the right to admit that I am wrong at a later date, however.

It's worth noting that the UK, France, Germany, Sweden, Australia, and almost every other western democracy finance very large chunks of their governmental expenditures via high consumption taxes. Most people agree that not only are they not hellholes with the poor and middle class starving on the streets, but they're actually nicer places to be poor than the US.

As I citizen of one of those, I can attest that this is true, but surely not for the reason that we have high consumption taxes. Those are actually regarded with uniform disdain.

It's for other reasons --like a proper welfare state, the hold of certain socialist ideals regarding wealth and redistribution, etc. Namely, we don't view being poor as a personal failure, and we don't try to "punish" the poor for being so. We understand that there are systemic reasons for poverty and try to correct or counter-balance some of those.

>> we don't view being poor as a personal failure

Thank you for pointing that out. I was very surprised when I moved to Japan from Europe that being poor is highly frowned upon and soelely seen as a personal failure. Obviously, that is mostly not the case and people in Japan work therefore sometimes multiple jobs, just to not look poor through their spending habits/clothing/gadgets w/e. Resulting in being more accepted by the society.

More surprising actually is, that really poor people (read: homeless) seem to view themselves as having failed in some regard and actually dont ask other people for empathy/remorse (they wont beg, mostly).

In my opinion, caring so much about the opinions of others is reactive, submissive and weak. I could never like like that. Personal integrity is far more important than keeping up with Joneses.

Japanese society seems batshit crazy, what with all the obsession on never losing face, committing suicide after making a mistake, working until you collapse, always bowing to "superiors" and kissing ass, even changing your grammar to please other people according to some byzantine rank system, etc. How can they live like that?

Hell, Sweden has those tendencies too but we are pretty much libertine anarchists compared to Japan.

> Your entire argument seems predicated on the idea that the US tax code has something to offer that the typical European tax code does not.

You read too much into this. I don't know that much about the European tax code.