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Comment by 9nGQluzmnq3M | Hacker News Reader

Compare the person earning $10,000 and the person earning $1,000,000. If they both consume $10,000 worth of goods and there's a 20% sales tax included in that, the poor person's effective tax rate is 20%, while the rich person's effective tax is 0.2%. Even if the rich person consumes 10x more, they're only paying 2% of their income.

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Then again, if you stuff 98%+ of your income into a mattress are you really advantaged over the person making $10,000 to justify paying more tax?

One you exchange the money - where an advantage can be gained - then it can be considered a sale and thus taxed. A sale does not necessarily need to be towards consumption.

I see what you're saying -- money isn't useful until it's spent. But I think the argument is that a wealthy person doesn't put that extra 98% of their money under a mattress, they invest it. Now they have passive income on top of their previous income, and their effective tax rate from sales tax is even lower. Until eventually they have so much well that they don't have to work at all, and neither do their descendants, and you have an aristocracy.

> they invest it.

But, if such a system was in place, the money would be taxed during the purchase of the investment vehicle. A sale is a sale. Unless the money is literally stuck in a mattress, it is going to be taxed upon doing anything useful with it. If it is simply stuck in a mattress for all of eternity, one is really no further ahead. Money only has value when you can use it to facilitate a sale; and when there is a sale there would be a tax.

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