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Comment by byroot | Hacker News Reader

> Why not finance helping quadriplegics from increased VAT?

Because VAT, beside being a very effective tax (it's the biggest source of income of most countries), is the most unfair one.

Say a country have a 20% VAT

Low income household need to use the entirety of their income to survive (food, housing, etc). So effectively 20% of their income is collected as VAT.

Now a upper class household, let's say they save 25% of their income each month as retirement plans etc, and spend the rest.

They've been effectively taxed at 20% of 75% of they income, so their effective VAT rate was 15%.

While you often see very high income people advocate for flat rate tax instead of progressive tax, none of them have the nerve to propose a reversed progressive tax like VAT is, where poor people pay proportionally more than rich people.

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You can mitigate that effect by some kind of basic income or return of paid VAT (you collect receipts or something and get the money back up to certain amount or 100% up to certain amount, 50% up to another step etc.). You can make VAT progressive this way.

there is no enforceable way this would work. everybody would just pay some homeless/unemployed to buy him that expensive cool little thing, and give him 10 USD for the job. try to prevent that :)

at the end, poor people would become less poor, but only by screwing with system, and only very few of them. you can put some limits on who can buy what, but this will inevitably create a massive bureaucratic overhead, meaning another set of useless government jobs that create no added value, but draw cash steadily from treasury.

The best possible tax scheme for poor people would be a simple flat tax that is impossible for rich people to avoid.

I've always felt your definition of "most unfair" to be a great fallacy. Yes poor people pay a higher percentage of their income. They also receive more in benefits than they give and the flat tax ensures the rich pay their share. The more complicated you make the system the more it will benefit the rich.

VAT is a net benefit for the poor. Making the whole system work that way, particularly in the face of globalization, is the best course of action. To declare it unfair is to cut off your nose to spite your face. In my opinion.

The best possible tax scheme for poor people would be a wealth tax. Make it a flat wealth tax, and I'm with you: 10% (or whatever) of what you possess, into the community coffers every year. Don't muck around with income, it's too easy to game.

Wealth tax is obviously (I think!) the best kind of tax but the problem with it is it's hard to collect (you would need to assess wealth of everyone and that is a problem).

So if I start my own company I have to give away 10% of that company every year? Because I own shares in my company. And those shares have value. Which contribute to my wealth. That seems terrible!

I don't see how a wealth tax is a good idea at all. If you could recommend a good article that argues why it's good and how it would work I'd love to read it.

Please consider what kind of behaviour you would encourage. If wealth erodes every year then this strongly disincentives long term thinking and rewards business ventures which give quick cash and then burn out, like strip mining, and punishes planning for the future like pensions.

You want your tax system to reward long term thinking, not punish it.

I don't understand why it would encourage what you are predicting. If you "quickly cash out and burn" then you pay a tax on it as well. My argument for wealth tax is that people with most wealth are the ones with the strongest interest to keep the country stable and nice place to live in.

Some of us initially poor but nouveau-rich would like to retire before we're old, you know. A wealth tax makes that much harder than it already is. You would also kill property ownership by all but the ultra-rich who have enough assets elsewhere to make up the continuous drainage because home appreciation does not grow that fast.

>The best possible tax scheme for poor people would be a simple flat tax that is impossible for rich people to avoid.

You're looking at the wrong end of the telescope. It's really not that difficult to look at a tax table and cross-reference your income, so a flat tax is a very minor improvement.

Where every tax system gets tripped up is in determining what qualifies as income. People who manage to avoid taxes aren't somehow lowering their rates; they're getting inflows of money excluded from the "income" accounting box.

It's not an easy problem to deal with, either - states have been trying for centuries. Most of the write-offs individuals and corporations take are perfectly reasonable for some situations and very much abused in others. As you try to prevent abuse you end up with a tax code that's so complicated there are more ambiguous "gray areas" for people to take advantage.

Treating everyone the same blindly is the very essence of fair. It is, however, unjust by your sense of justice. There's a vast difference between the concepts.

You're also assuming a specific sense of justice - you're assuming that the utility of money is linear. (That is, giving up $10 is the same to someone earning minimum wage and to someone earning $150k).

You can hold that view - but recognize that it is a specific view, not an essential definition of fairness.

VAT is already being collected, and Apple contributed to it enormously by creating new markets (like tablets).

That increase can be used to help quadriplegics.

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