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Comment by legulere | Hacker News Reader

If we want our countries to have the same tax revenue, then every time we reduce the tax on something we also need to rise the tax on something else. So the taxes you will save will be paid by someone (most likely yourself) somewhere else.

So making something tax free/reduce taxes is more like a subsidy. By reducing taxes on basic amenities like food you're subsidizing the poor, as more of their money will be spent on basic things. When reducing taxes on something else, then you're essentially subsidizing that thing. It makes sense to subsidize internet access if you want to temporarily give a boost in adoption. But if you make that tax free status perpetual then you're saying that this is more important than everything else that doesn't get the tax free status.

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> If we want our countries to have the same tax revenue

Which is not a premise we should automatically accept without question or criticism.

> then every time we reduce the tax on something

This didn't reduce taxes on the Internet; it makes a statement that new taxes will not be added to the Internet. You could ask whether taxes could be lowered in some other area by adding taxes to the Internet. But this isn't a question of "where do we get the money that lets us lower the taxes on the Internet", not least of which because there weren't any to begin with.

Also worth noting that the economy is not a static set of transactions where taxes can be raised and lowered in proportion to keep tax revenue static. Sometimes people start buying less of one thing and more of another, which also changes tax revenue. And that shouldn't automatically result in an effort to start taxing the new thing. (For that matter, taxes themselves can cause people to change what they do, hence the concept of "excise" taxes.)

> Which is not a premise we should automatically accept without question or criticism.

Yes, but it's a different question. If it makes sense to reduce the tax revenue you can generally lower taxes for all products. I'm concerned with the distribution of where taxes need to be put, not the amount.

> This didn't reduce taxes on the Internet; it makes a statement that new taxes will not be added to the Internet.

I'm not sure how it works in the US, but in the EU services (including internet access) are generally taxed with a VAT, just like every other product (excluding those with exceptions).

> Also worth noting that the economy is not a static set of transactions where taxes can be raised and lowered in proportion to keep tax revenue static.

There certainly are large fluctuations, but in the long term states try to balance expenditures and (tax-)income. When the scope of what the state does grows usually new taxes get introduced or taxes get raised.

> And that shouldn't automatically result in an effort to start taxing the new thing.

I say exactly the opposite: you can use taxing to make people buy more of something (some new tech you want to push) or less (e.g. cigarettes).

> If it makes sense to reduce the tax revenue you can generally lower taxes for all products.

This isn't about reducing tax revenue; this is about not increasing it, and specifically about not creating a new tax.

If tax revenue has gone down in some other area, the presumption should not automatically be to raise taxes elsewhere to compensate.

> I'm not sure how it works in the US, but in the EU services (including internet access) are generally taxed with a VAT, just like every other product

Taxes in the US aren't nearly that uniform. Goods and services are not taxed universally at the federal level; many such goods and services have one-off special-case taxes. For instance, phone service has several taxes. Internet service, however, does not. This bill is a statement against adding new special-case taxes for the Internet, and against adding new taxes for goods and services purchased through the Internet specifically because of their method of purchase.

Imposing any kind of universal sales tax would be an entirely separate question.

> I say exactly the opposite: you can use taxing to make people buy more of something (some new tech you want to push) or less (e.g. cigarettes).

The US has various such subsidies and excise taxes (the latter of which I already mentioned). But this isn't an instance of that; this is simply choosing not to create a new tax on the Internet.

I say exactly the opposite: you can use taxing to make people buy more of something (some new tech you want to push) or less (e.g. cigarettes).

This is assuming that substitution effects invariably or above sufficient thresholds dominate over income effects, which in the case of addiction is a dubious proposition.

In the case of cigarettes, making them prohibitively expensive for teens will inevitably curb consumption over the coming decades, even if no adult addict quits because of the tax increase.

Tax incentives on the other side absolutely work as well. I have a LEAF parked outside instead of my old Mercedes diesel precisely because the feds and state combined to give me $10K in gov't cheese to facilitate the purchase. Sure, I wanted it, but paying $20K was a lot easier to justify and I wouldn't have bought it for the "full" $30K.

Cutting overall spending is important. Cutting overall taxes just destabilizes the system by increasing debt, which is a terrible idea.

It's like people talking about the laffer curve, forgetting that when you sit on the left side cutting taxes reduces revenue.

I don't know what confusion of ideas created your current state of mind, but a reduction in tax is not a subsidy.

The maximum benefit to the economy is achieved when economic distortion due to tax or subsidy is zero.

Consider the traditional supply vs demand plot:

  $| \D   S/    In an undistorted market,
   |  \   /     the equilibrium point where
   |   \ /      D and S intersect determine
  A|----X       the price (A) and quantity (B)
   |   /|\      that will be sold. 
   |  / | \
   | /  |  \
   +---------
        B   #

The consumer benefit to trade is the area below D and above A. The producer benefit to trade is the area below A and above S.

  $| \D   S/    In a taxed market, the tax
  C|--\   /     creates a difference between
   |  |\ /      what the consumer pays (C) and 
  A|  | X       what the producer gets (E).
   |  |/ \      As a result, the quantity sold
  E|--/   \     drops to a lower value (F).
   | /|    \
   +---------
      F B   #

The tax revenue is the area above E, below C, and left of F. It is possible this can be returned to the economy intact, if the government spends it wisely. The triangle of the former benefit of trade to the right of F and left of B is deadweight loss, and is lost forever. The new consumer benefit is above C and below D, while the new producer benefit is below E and above S.

  $| \D   S/    In a subsidized market, the subsidy
  G|--\---/     creates a difference between
   |   \ /|     what the consumer pays (H) and 
  A|    X |     what the producer gets (G).
   |   / \|     As a result, the quantity sold
  H|--/---\     increases to a higher value (I).
   | /    |\
   +---------
        B I #

The cost of the subsidy is the area below G, above H, and left of I. This produces an additional consumer benefit below A and D, and above H, and additional producer benefit above A and S, and below G. Note that this produces another triangular area of deadweight loss that the government spends to produce zero additional economic benefit.

In conclusion, a reduction in tax cannot in any way be reasonably considered equivalent to a subsidy.

Correct, its not a subsidy under your definition. But it is a relative advantage compared to other products (in layman's terms this is very close to the meaning of subsidy) .

Considering i have a pool of $50 to spend, I can buy more internet access now (or will begin to buy internet access) to the extent that the marginal dollars give the greatest utility over other products (which are taxed). Ex: imagine a internet plan is taxed such that it is $50 under the old taxed regime and $45 under the new taxed regime. Under the old regime, internet access purchases had to compete against other choices that cost $50. Under the new regime internet access will compete against $45 choices. Anyone currently not spending $50 on internet because other $50 dollar choices are better may shift away under the new regime because the $45 internet is a better choice than the still normally priced $50 choice.

As well, to the extent that the government spends tax money on anything ISP related, that expenditure is now a greater net subsidy than prior cases where some amount of tax offsets the subsidy (eg, $50 subsidy - $5 tax ==> $45 net subsidy in the old regime becomes $50 subsidy - $0tax ==> $50 net subsidy in the new regime)

Selective reduction in tax is indistinguishable from a subsidy.

It is indistinguishable to any individual consumer or producer, and usually to the government, but in aggregate, it is distinguishable by comparing the amounts of the deadweight losses before and after the change. The consumers only see where the market is trading relative to their position on the demand curve. The producers only see where the market is trading relative to their position on the supply curve.

Any party persuasive enough to know the total price and quantity traded in the market might be able to estimate deadweight losses by analyzing the market data before and after changes in the magnitude of manipulation, and extrapolating from the slopes of the two curves.

If a reduction in a tax is paid for by an increase in another tax, the effect is determined by the shapes of the supply and demand curves in those different markets, and is not easily calculated, as any given consumer or producer only knows a tiny fragment of the information needed.

That's the problem with the science of economics as a guide for political economic policies. No one gets mad about the numbers they can never calculate. Even though every tax and every subsidy inevitably results in the metaphorical equivalent of digging a huge hole, throwing tons of other people's money in, and lighting it on fire, no one really knows whether that bonfire is a net benefit or detriment to them, personally. Some people would be quite happy to burn $100k of other people's money if they got an extra $10k for themselves as a result. Some people would be happy to destroy $100k forever, just to reduce the total number of tobacco cigarettes sold by 0.5%.

As a thought experiment, imagine an economy with only two goods: Foo and Bar. Now copy it. In your copy, you tax Foo by 10% of its final sale price, and every last penny collected from that tax goes to subsidize Bar. Run both simulated economies in your head for a few years, and try to determine the effects.

Your making an assumption that tax rates are directly proportional to revenue. In fact, for elastic demand, tax rates are inversely proportional to revenue. This is why utilities such as water and power can essentially raise taxes at will because it hardly effects the demand. While online shopping.. If it's taxed more people would just find and alternative or just not buy at all.

If you lower taxes on something that means more people use it or buy it, which means there's a net gain of taxable activity as a rate approaches zero. Of course a zero tax doesn't follow those rules, but an increase of internet activity results in an increase of sales which means an increase in the amount of taxes paid by that business, an increase in the number of people hired and thus an increase in the amount those people pay in taxes.

So a zero Internet tax rate would necessarily increase economic activity resulting in an increase in overall revenue despite a lower effective rate.

The Keynesians ought there might disagree, but Friedman proved them wrong in the 1970s.

I know the left wing is in love with high taxes but that's based on the mistaken understanding that the government is a better arbiter of how to spend our money than we are as well as a political desire to give things to people that didn't earn them.

Yes, this is just yet another special tax exemption.

Internet access has become a humanitarian right. Saying it is less important than a different tax subsidy would be interesting given most tax subsidies impact things of far less importance.

How can internet access be a right? We can have fair access as part of the social contract; we can pass an amendment to exempt it in some special way; we can all agree to use other taxes to support it -- but we can't declare it a right.

You have a natural right to communicate and perhaps a natural right to access a public system that others can access. But no one has an inherent right to tax someone, or to fund some service.

> How can internet access be a right?

How can free speech be a right? Rights are arbitrarily assigned. Internet access is not a right in the US today but many point out that it could be given the importance of it.

The general idea is that since humans are self-conscious and born with innate natural rights, that these are the rights that can never be taken away unless proven guilty of a crime in a court of law (ideally if there's an actual victim but this could be argued against).

There are some 18th century philosophers who talked about two types of rights but I can't remember the analogy.

But essentially, you were born with human freedom, even your ancestors and all of our ancestors in Africa. And these are the rights that existed prior to civilization, government, the Bill of Rights, the UN and the EU.

This is why some say they come from God, to distinguish them from the government. But you might as well say they came from the Higgs Boson because Jefferson et al were Deists.

The reason this is important is because why would you want to diminish your own personal sovereignty knowing what we all know about human nature and power?

This is why the Bill of Rights says Congress shall make no law restricting Freedom of Speech. It does not grant or create a right or privilege. It acknowledges it.

The organic law (Dec. of Indepedence) declares this in the right to life, liberty and the pursuit of happiness. Deny this to an Enlightenment-thinker, and prepare for silent revolution.

We should resist the utopian temptation to accept the falsehood that rights are privileges. In the 20th century in the United States, wealthy idealists who often doubled as Marxists created the American Historical Association (historians.org), and promoted the idea that the centralization of power was always a good thing, i.e. collectivism. And to do that, they taught that truth was relative and that natural rights and classical liberalism was irrelevant in the face of supranational political utopias.

This is covered in Professor Allen Bloom's book, "The Closing of the American Mind."

We are all from Africa and we all have natural rights. So since the US was the first nation to acknowledge this, and since the EU does not acknowledge natural rights and in fact is a bureaucratic nightmare, then it is fair to suggest that we all are in fact "African Americans", free and individually powerful since our ancestors lived in Ethiopia and Somalia.

And telephone access isn't? It's got taxes like crazy.

No, I don't think the telephone has ever been as important as access to the internet. In my estimation, it's not even close.

Just 911 on it's own is more important for most people than the internet.

911 is synonymous with any fast communication system. Had the internet developed before voice communication; 911 would still exist (in a different form).

> I don't think the telephone has ever been as important as access to the internet

Maybe you're thinking from some perspective I'm not seeing, but this sounds odd to me.

Prior to the telephone, geographically separated people were days, weeks, or months apart when communicating with letters. The change from that to being to call people on a whim must have been life changing.

Long distance communication with known people is important. It pales in comparison to the communications and empowerment consequences of the likes of Google and Wikipedia.

It's difficult to find any research in this area. What I could find generally says that the advances made in earlier years are more significant than anything recent.

http://www.cepr.org/sites/default/files/policy_insights/Poli...

That may be true in terms of relative orders of magnitude, but not in terms of absolute change.

You are forgetting about the telegraph! And before that, semaphores.

I don't think the telegraph was ever really accessible to most people. Businesses, wealthy people, perhaps for rare or remarkable news for regular people.

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