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Comment by themartorana | Hacker News Reader

This is my favorite proposal to date. Sales tax applies equally to a pencil and a yacht. It also encourages savings at lower income levels.

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That's the problem, too -- it applies equally to necessities and luxuries. Sales taxes are regressive because there is a certain amount of non-discretionary spending everyone has to make, regardless of income, just to live.

Most sales tax proposals include a "universal rebate", which is a fixed monthly amount given to everyone that's intended to cover the tax on necessities.

Certainly there are ways to mitigate the effect, I was just pointing out that the universality of a sales tax isn't all positive.

We tried a luxury tax in the 90s.

Yachts were more expensive and due to highly elastic demand, the industry plummeted. Companies went under or laid off thousands.

But don't worry. Guess who works at yacht manufacturing plants? Not rich people. They weren't hurt, and they were fine with taking their money elsewhere.

Nice straw man. I didn't even mention luxury tax, let alone promote it.

You implied that it would be better if luxury items were taxed at a different (higher) rate than other items. They is a luxury tax.

However, if I misunderstood and you advocate having the same tax rate on luxury goods as other goods, then we are in agreement on this point.

It doesn't necessarily need to. We could have a `digit-sales tax', i.e. count the number of digits in the item cost and add a tax at that percent. Something less than $10 only has a 1% tax, while something costing $10,000 has a 5% tax.

Clearly the numbers should be adjusted if someone wants to turn this into a serious tax proposal, but it seems possible to design a progressive sales tax.

It's not quite so simple. Many non-essential things are cheap (e.g. iOS games), and many essential things are expensive (e.g. housing, transport). The line between essential and luxury is also subjective. So you have to start categorising, and things get messy.

Costco would be a bad place to shop.

A sales tax is the ultimate regressive tax. At the low end, you don't have much to save anyways (you need to eat!), so you are spending your income and getting taxed. At the high end, you can save a lot more since you make more. And you can always fly off to Hong Kong for a weekend to buy things (that is what happens today in China which has a high VAT/import tax).

No, I think you mean a true flat tax, e.g. a poll tax, is the ultimate regressive tax.

I have come to find that "regressive" moves the goalposts. It sounds as if the rich pay less. They don't pay less; they pay more. They just don't pay more when dividing taxes by their total income. I've never heard a convincing argument for why that formula is the ultimate benchmark.

And anyway, virtually all sales tax proposals have some per capita rebate/basic income, and that can be tweaked to make it as progressive as your heart desires.

It's a terrible idea, a sales tax taxes spending instead of earning which automatically is a huge tax cut to the wealthy who by definition spend a far smaller percentage of their income than the middle classes who basically spend it all. Taxes belong on income, not on spending; sales taxes are incredibly regressive.

My bad. At the time of posting I thought that FairTax was fairly well known.

https://en.wikipedia.org/wiki/FairTax#Monthly_tax_rebate

And as with all things government, it's the opposite of what it's named. The fair tax is anything but fair. If you only tax spending, then the rich, who spend far less than their income, can effectively avoid taxation of most of their earnings by simply living below their means, which they do anyway because that's what being rich is. If I make a million a year but consume like someone making 100k a year, I only pay taxes on 1/10 of my income; hardly fair since the guy actually making 100k is paying taxes on 100% of his income.

No, yachts get a break on sales tax.[1] Really.

[1] http://www.pressofatlanticcity.com/business/new-jersey-cuts-...

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