I don't understand your point. Even the rich will have to pay 13% once they spend the money.
Most people, when money comes in, they spend it on things, so it immediately has to also pay VAT. If they're lucky, they may have some savings, but it's going to be on the order of 2-3 months' worth of income.
Rich people make orders of magnitude more money, and mostly need to spend the same order of magnitude to live as the rest of us. The money beyond that, they mostly don't spend on the same kinds of things. After all, what would you do with a million dollars' worth of soap?
There's no VAT on lobbying, on buying a house in the Caymans, on hiring six people to clean the mansion.
VAT, like all consumption taxes that aren't highly targeted, is hugely regressive.
If we can agree that the VAT is levied because the government has added some value to each product sold (value added tax..) then I don't see why spending money on VAT-exempt items makes VAT a bad tax.
If you spend it on labor, housing, there are taxes associated with that other than VAT. Lobbying and charities might be tax-deductible or exempt, that is another discussion.
I think your point is that regressive taxes are bad, is that a fair analysis? I don't agree with that.
My point, however, is merely that VAT is a regressive tax.
However, I fail to see why regressive taxes are bad in general and why VAT is bad in particular.
I was originally interested in the question by someone else before me:
> I'd be interested to hear your reasoning for why you think sales tax is so bad.
What value has the government added to consumer products I purchase in the store, particularly in the USA where tax rates vary from state to state, county to county, or even city to city? There is no national sales tax here, but consumer regulation is still a thing, and factors into the base price of goods.
I’m still genuinely interested in what value you see the government adding, but I think this might be why Americans and Europeans are disagreeing here.
So perhaps a more effective and fair means of paying for it is to recognize that those with higher incomes are the most financially able to support the cost, and develop a progressive income tax that ensures that the highest burdens are put on those with the greatest ability to bear them.
European countries have this.
I understand why it’s appropriate to tax [fill in blank] in order to fund emergency services.
People with high income are more able to pay such a tax, if it’s structured progressively. People with real estate holdings benefit most from emergency services.
We disagree, I guess.
So why not levy taxes against the land value of those who own the property adjacent to those structures? They are the ones who see the most benefit when the value of their land increases, causing their wealth to increase dramatically. For example, the shop owner derives vastly more benefit from the sidewalk in front of his shop than do the pedestrians who occasionally walk by.
Sales tax is a toll that gets charged to everyone, equally, when the benefits of the spending are distributed unequally.
It's called that because the effect of the way the tax is implemented is to tax the _addition_ of value to the product by those being taxed on its way to a consumer.
Suppose I buy a vacuum cleaner from a big store nearby for $100 plus $25 VAT. I don't need to care about this, but presumably the big store bought it from a vacuum cleaner manufacturing company. Maybe they want $50. Two things could happen, the manufacturer could charge $62.50 (adding VAT) which the big store then needs to claim back because they only bought it to then sell it to me - or more likely - the two firms exchange details and both create paperwork showing that the vacuum cleaner cost $50 and no VAT was charged. We can see that either way only $12.50 of the VAT is attributable to the big store, the rest is in some sense someone else's fault, either the manufacturer or their suppliers in turn.
Poor people who spend all of their money every month pay more in sales taxes, as a percentage of their income, than rich people who invest and save most of their income.
That has to be satire, right?
On the chance it isn't: Because they are poor. You know, spending all their income on housing, food, clothing and getting to and from work. A simple car repair, or broken cooker could tip a poor family into crisis. There's nothing left in the pot for investing.
And to be clear, when I say "access to," I don't mean that we should have the ability to just spend someone else's money. I mean that while they hold that money, and do not spend it, as far as the entire rest of the country/society/system is concerned, it does not exist. The effective pool of dollars is smaller.
a) I'm wrong
b) Something else is artificially holding the value of the dollar up
c) Those theories are wrong, or
d) It just hasn't been long enough yet.
I'm not arguing that there's anything wrong with incentivizing investment this way, or that there are not risks to such investments, but I do think it's worth pointing out that effectively this is a case of "being paid for being rich", and the richer one is the more one gets paid.
I guess I just don't see the problem with rich people having more left over after paying the sales tax than poor people do.
The problem is that they can spend it on capital which then lets them earn more and more wealth. Maybe you also disagree with the claim that inequality is itself a problem? That would put you in the minority in most places.
If not, then consider this: sales taxes, due to their regressive nature, increase inequality and funnel more wealth to the top. Taxes on unearned economic rents (such as land value taxes) are progressive, decreasing inequality and spreading wealth more evenly throughout society.
Example: I recently needed to switch both jobs and housing urgently. When I learned this, I had about £13,000 in liquid savings and $7,000 in almost-as-liquid savings. I didn’t end up needing to really touch more than £3,000 of those savings pots. So was my £10,000 of extra savings giving me any utility?
Absolutely yes. I was much less worried.
Contrast this with someone who has no savings and whose tire blows. How do they acquire $250 in order to be able to keep their job?
It's fine to have haves and have-nots, but the burden of supporting society should be equally borne, financially by those with financial means and laboriously by those putting in the labor. Regressive taxes force those without capital to pay twice.