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Comment by oDot | Hacker News Reader

It actually makes much more sense to use a uniform sales tax:

(1) If you spend more, you're taxed more. Obviously this is better for poorer people, who spend less, but also for rich yet reserved people, who keep most of their money in the bank (which lends it) and are earning an income (=productive). Both will not penalized.

(2) It's much hard to raise, because people will just stop buying stuff, which is much easier than quitting a job to not pay income tax

(3) Being uniform, it doesn't choose favorites. Everything is taxed the same

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Sales tax fails to capture the accumulation of capital, so (1) is kind of bogus. If you make 100 billion dollars and invest it you and several generations of your family coild live comfortably without ever working and your tax burden would only depend on your spending.

A sales-only tax incentivized rent seeking, basically, because the rentiers pay the same taxes as the renters while accumulating capital.

and so often it gets invested in land, which includes not just the sites under our feet, but vital natural resources, the kind that are finite in supply.

If you take a look at the data, "investing in land" wasn't as luxurious as it is today, due to government actions inflating the market.

But what is investing other the attempt (aware or unaware) of creating wealth? When people make money, it means someone bought something from them. This means they had to create something other want. That can be a service, a good, or a house for rent. Remember that those who rent houses are people who can't afford to buy them, so they need someone with capital to manage the house. I am renting myself and I much prefer it at the moment to owning a house.

You want billionaires to keep their money, because unless they put it under their mattress, they are growing the economy, which means lowering prices and raising quality.

> rich yet reserved people, who keep most of their money in the bank (which lends it) and are earning an income (=productive) ... will not penalized.

This goes against just about every standard defense of the ability to be rich: that rich people are job creators, that they power the economy by buying things, etc. Why should we discourage them from employing people and buying things? I don't want a loan (that needs to be repaid) from a bank from a rich person, I want the rich person to either employ me or buy goods and services from me.

Actually, that's another point - does employment incur your "sales" tax? If not, it's more advantageous to hire a private chef or driver than to pay for a restaurant meal or a taxi trip, which makes the tax regressive - there's a discontinuity when you're able to hire someone instead of getting a service from a business.

Replace "the rich" with "Lords" and your post is an adequate defense of feudal society. In other words, you're thinking "inside" the system, i.e. justifying the system with itself.

Well, the position I'm arguing against is that the lords should be left alone, that it's better for them to have their fiefdoms be isolated places than to actually employ anyone or purchase anything, and that we should use tax law to incentivize the lords to never interact with the peasants.

(Or in other words - my actual position that the nobility should be abolished. I'm just surprised to see someone say not only that it should stay, but that the world would be better if they didn't provide any of the benefits people usually claim in defense of feudal society, so I'm trying to understand what their position is.)

An economy is driven by production, not consumption.

Sure. But the standard way of driving production is private consumption. Given that you have disincentivized the poor from consuming, what is the counterbalance that incentivizes the rich to produce?

(There are a couple of standard answers, including government consumption / public works projects, that can address this.)

Private consumption is only possible due to productivity gains due to capital investment. Venezuelans can't just vote to redistribute nonexistent wealth or declare food to be a human right and magically have sufficient food appear.

Food comes from capital investment in farms, factories, etc. That is real wealth.

>There are a couple of standard answers, including government consumption / public works projects, that can address this.

These answers don't work, and are great at destroying wealth.

Note that a sales tax as only tax means no income tax, so overall a gain to production incentives.

An economy is driven by free money.

The standard defenses of the ability to be rich are persuasive arguments promulgated by those who are rich.

If we assume that the rich are, as other advertisers, rational and self-interested, the we should expect their messaging (i.e., the “standard defenses”) to be that which is most effective.

Something akin to if it works, it ships.

Consider that from the perspective of the accountants, every job created is a huge and ongoing liability and cost, and that from the perspective of the shareholders, every job created is stolen profit, money that is not returned in the form of equity appreciation + dividends.

Then you will begin to see the reality of the situation.

The issue I've always had with the uniform sales tax idea is that poorer you are, the larger percentage of your money you pay in taxes. As a total cost, it's ultimately regressive.

Really, the thing is that the whole "single tax idea" is a bit misguided. A consumption tax (sales tax) is great, but there are some sensible reasons to tax capital income/investment to some extent, too. Mostly, because it correlates somewhat with basic ability-to-pay; also, because people might try to disguise income/expenses as investment-related in order to shield them from taxation, and having a more uniform tax base helps prevent this.

But the broad principle that capital investment should bear a lower tax burden is quite correct. And one you've accepted that general principle, it makes a lot of sense to tax rent-generating assets like land and spectrum rights (since those are not really "capital" in the first place), which is pretty much the Georgist idea.

> Mostly, because it correlates somewhat with basic ability-to-pay;

What do you care about ability-to-pay?

> ...also, because people might try to disguise income/expenses as investment-related in order to shield them from taxation, and having a more uniform tax base helps prevent this.

You can't shield from that tax. All entities pay, for every sale, no refunds.

> What do you care about ability-to-pay?

Because it helps align incentives. You can have a 7% tax on sales, or a 5% tax on sales plus a 2% tax based on a noisy correlate. The latter will raise more revenue at a lower excess cost.

> You can't shield from that tax. All entities pay, for every sale, no refunds.

That would make it a tax on revenue, which is quite distortionary indeed and generally considered a last-resort. (Or you could have a VAT, where all entities pay but tax paid on non-final sales is refunded. VATs are quite good but not totally free of this kind of gaming.)

> Because it helps align incentives. You can have a 7% tax on sales, or a 5% tax on sales plus a 2% tax based on a noisy correlate. The latter will raise more revenue at a lower excess cost.

I see. Well we seems to have different goals. As I see it, government is mostly good at destroying wealth, and so I aim to minimize their revenue.

> That would make it a tax on revenue, which is quite distortionary indeed and generally considered a last-resort. (Or you could have a VAT, where all entities pay but tax paid on non-final sales is refunded. VATs are quite good but not totally free of this kind of gaming.)

I am essentially suggesting a non-refundable, uniform VAT

> As I see it, government is mostly good at destroying wealth, and so I aim to minimize their revenue.

The "excess cost" I was referring to is precisely a matter of destroying wealth. It's all well and good to limit government involvement in the economy but clearly, whatever revenue it does collect should be collected efficiently.

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