Comment by pa7x1 | Hacker News Reader

Comment by pa7x1 | Hacker News Reader

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This tax shenanigans happen because we have built an absurdly complex tax framework which can be gamed/abused with economies of scale. The solution is to streamline the tax framework as to make its implementation almost unavoidable.

Long-story short, my bet is:

- Sales tax (VAT)

- Inflation

- UBI

Sales tax is far less gameable as it's linked to concrete economic activity. It also has the benefit of tracking the added value produced by an economy (it has the right properties as a tax). It has a problem though, it's regressive, see last point. Every economic activity should be included (e.g. stocks should have a VAT; you sell stock you collect VAT, you buy stocks, you pay VAT). Some progressiveness may be included by using different VAT rates for different products, to be done judiciously.

Inflation is a fantastic tax, very hard to game as it's quite pervasive and taxes the accumulation of capital so it tends to be distributive, anti-regressive. Cash sitting idle does nothing for the economy so disincentivizing it makes sense. This doesn't mean that inflation has to be high (the usual moderately low and positive that economists aim for may be reasonable), just that inflation should be seen as the taxation mechanism for the accumulation of capital. And we shouldn't reduce it to a single number for the entire economy but understand how inflation is evolving in the different parts of the economy to make sure monetary and fiscal policy are hitting the targets.

UBI, fixes the regressiveness of VAT. UBI is not too different from having a lowest tax-free income bracket or even negative-tax income bracket if you prefer to look at it that way. UBI can also help hit the right inflation rates in consumer products which we have been having great trouble achieving through conventional central bank policies.

I think this mix is far less gameable, tracks better the size of the economy, places the right incentives and disincentives and will survive better the ongoing economic transformations (good luck taxing income when most of the economic output is produced by computers).

Inflation is a tax on capital held in monetary form. It is not a tax on capital held as the earning power of an ongoing business. If I hold $1M of cash, I care about inflation eroding that over decades. If I hold $1M worth of DCF of Coca-Cola's future profit streams, inflation does not concern me for that portion of my capital.

Correct, thanks for bringing to attention that distinction.

My point is that the idle capital held in monetary form does nothing, so I want to disincentivize that to some extent. While I have nothing against that capital being available to an enterprise, they inject it back to the economy through their CapEx, R&D, income for employees, etc...

Potentially a company may also sit in vast piles of idle money (e.g. Apple), the value of the company will take into account the DCF and also the existing liquid reserves. In that case the liquid reserves will be progressively diluted by inflation and again, that's a desired outcome (in my view).

This is my personal opinion, but even if we had perfect global tax laws, people would still find a way to abuse the system. I see the issue being too much power concentrating into too few hands. If you have too much power humans naturally use it. Rich get richer and poor become poorer. How do you see better tax code and UBI will fix this? How do you prevent abusing power?

Land value taxes also seem like they would work very well, have some nice incentive effects and are hard to game: https://en.wikipedia.org/wiki/Land_value_tax

> Inflation is a fantastic tax, ..., anti-regressive.

_Thomas Picketty has entered the chat_. History has shown that the rich are able to (easily) outpace inflation, while the poor (read: effectively ~95% of the planet) do not.

So I'm not too sure that is a desirable claim to make here.

Sales tax is extreme regressive, more than UBI can handle. Unless you are proposing a 50% sales tax and a progressive UBI?

Sales tax would be the only conventional tax in the scheme proposed. So it would need to be as high as needed to fit the public government spending. In some EU countries that would be above 50%, in the US may be roughly 40%. That may seem like a lot but averaged it would be the same than the average tax payer paid before, except more evenly distributed so likely median tax payer would be benefited.

UBI by itself is progressive, a simple flat UBI creates a progressive effective rate. You can tweak the numbers to obtain your desired target tax curve; increasing or decreasing UBI, having different VATs for different products. As John Von Neumann said, "with 3 parameters I can draw an elephant and with 4 I can make it wiggle its trunk". There is enough free parameters to make the taxation more or less progressive.

I'm not prescribing those details because I think there should be ample room for fine-tuning. What size government spending should have in an economy and how progressive should a tax system be are questions that different countries have answered differently and you find success and failure all across the spectrum. So I consider it a transversal issue.

My focus is on efficiency, resiliency to abuses/gameability and economic incentives.

I admire the proposed simplicity (and agree that setting the levels can largely mitigate any concerns of regressive nature [especially as compared to today]).

My concern under a sales-tax only system is that politicians also like to be seen as aiding employment and a sales-tax only system does not seem as supportive of employment as today's system where employment expenses are offset in part by their tax deductibility. No one goes out and employs someone for $100 to save $20 on taxes (still -$80), but I still employ more people when it costs me $80 than when it costs me $100 to do so. In that regard a VAT is superior to a straight sales-tax.

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