Comment by thaumasiotes | Hacker News Reader

Comment by thaumasiotes | Hacker News Reader

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As a matter of economics, that sentence is nonsense. Tax incidence is determined by elasticity of supply and demand, and has nothing to do with the logistics of which person gives money to which other person. This is the perspective that matters; you can easily observe for yourself that two taxes on gross revenue will have exactly the same effects if the only difference between them is that one is called "sales tax" and one is called "revenue tax".

As a matter of logistics, your claim isn't nonsense. But it is quite obviously false. The consumer gives money to the merchant. The merchant gives money to the government.

As a matter of legislation, it is, once again, plainly false. Here's the beginning of the California law imposing the state sales tax ( https://www.cdtfa.ca.gov/lawguides/vol1/sutl/6051.html ):

> For the privilege of selling tangible personal property at retail a tax is hereby imposed upon all retailers at the rate of 2½ percent of the gross receipts of any retailer

(emphasis mine)

And the law _must_ be stated that way, because if a vendor is selling something for $100 + sales tax, the customer pays $100 ("no tax"), and the vendor accepts it, the customer hasn't violated the law. The vendor is allowed to charge whatever price he wants. It's the vendor's responsibility to pay tax on the $100 of gross receipts he just received.

There is no framework in which "sales tax is paid by the consumer" is true. What were you thinking?

I read the parent as saying "sales tax is incident on the consumer" which is mostly true, and not refuted by anything you posted. Why do you think sales tax can't be incident on the consumer as you imply here:

>There is no framework in which "sales tax is paid by the consumer" is true.

I'm reading klyrs' comment that way because he responded to my comment. I pointed out that many giant companies already face a straight tax on their revenue, called "sales tax". In order to make klyrs' response relevant, I'm interpreting it as the nonsensical objection that sales tax is different because it is a tax on "consumers", while a revenue tax would be a tax on "companies". The objection is nonsensical because, as I point out in my reply, you're collecting the same money from the same people.

If you want to interpret him as commenting that the ratio of elasticity of demand to elasticity of supply is very low, you then need to explain how that observation fit into the conversation.

> Why do you think sales tax can't be incident on the consumer as you imply here:

>> There is no framework in which "sales tax is paid by the consumer" is true.

In the tax incidence framework, in order for the tax to fall entirely on the consumer, elasticity of demand would need to be 0. The easy point is that this is never the case. But the better point is that in this framework, you don't assign taxes to a single party, and therefore "sales tax is paid by the consumer" is a conceptual error.

Timeout.

You just replied and exhaustively dug up a citation to refute every apparent interpretation of a comment.. But the moment I point out the obvious, charitable interpretation you missed, suddenly, you can't google? This seems like bad faith. You're apparently willing to research every claim, as long as doing so makes someone else look wrong, but not when there might be an actual reasonable meaning of what someone else said.[1]

And then, again, you misinterpreted me to make my claim trivially false. I said that it's "mostly true" that the sales tax is incident on consumers, and then you "misread" me as saying that the burden falls "entirely" on the consumer, thus creating the much higher burden of proving an elasticity of 0?

That's really not how to have a productive conversation.

If you or other readers still want to go that route, then here you go: a (summary of an) OECD working paper that shows that sales taxes in practice are mostly incident on consumers:

https://taxfoundation.org/new-oecd-study-reviews-research-be...

In any case, as fate would have it, the original commenter was harboring the confusion you suspected about the distinction between physically paying the tax, vs bearing its economic burden:

https://news.ycombinator.com/item?id=22787539

But still, if you're going to be charitable, be charitable. If you're going to research every possibility, research every possibility. Don't suddenly lose this ability when it might not make someone else wrong.

[1] i.e. "paid by" being a casual way to say "economically incident on".

> I said that it's "mostly true" that the sales tax is incident on consumers, and then you "misread" me as saying that the burden falls "entirely" on the consumer, thus creating the much higher burden of proving an elasticity of 0?

You said that.

klyrs said "sales tax is paid by the consumer". You were discussing how to interpret his comment.

> In any case, as fate would have it, the original commenter was harboring the confusion you suspected about the distinction between physically paying the tax, vs bearing its economic burden

It's difficult to see how you can say this, since he quite clearly says the opposite. He's drawing a clear distinction between physically paying the tax and being the source of the money.

> It's semantically true businesses are required to make those payments to the government, but they're coming directly out of my pocket.

In that comment, he claims that every single expense a business incurs, tax or otherwise, is paid by that business's customers. He is in fact arguing for an elasticity of 0. That claim is not correct as a matter of cost incidence. As a matter of pure cash-flow accounting, it sounds obvious, but it's actually self-contradictory -- you can repeat the analysis to show that in fact business expenses are not paid by consumers, but by the employers they work for. But he clearly understands that there's a difference between suffering from the tax, and physically transferring the money. His confusion is over the idea that, if a flat $5 surcharge is levied on Oreos, and when you buy Oreos the receipt includes a line saying "Oreo tax - $5.00", that that might be costing Nabisco anything. He says it doesn't. He is wrong.

When businesses give me an itemized bill, wherein I'm required to pay the taxes you're insisting are theirs to pay, then it's me, the consumer, paying taxes. It's semantically true businesses are required to make those payments to the government, but they're coming directly out of my pocket.

As missedthecue and I have both already pointed out to you, the payments come out of your pocket, in the (incoherent) sense you're using here, whether you get an itemized bill or an unitemized bill, because 100% of revenue comes out of your pocket. So what?

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