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Comment by blunte | Hacker News Reader

Also, these days the complexity of our creations is such that almost never could one person really personally succeed without the contribution of others.

A common complaint among some groups is that they worked really hard and built successful businesses, and they shouldn’t be taxed to pay for services that do not benefit them. But they neglect to account for the infrastructure, relative availability of educated workforce, and even regional economic stability which allows others to reliably consume their products.

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> A common complaint among some groups is that they worked really hard and built successful businesses, and they shouldn’t be taxed to pay for services that do not benefit them. But they neglect to account for the infrastructure, relative availability of educated workforce, and even regional economic stability which allows others to reliably consume their products.

Absolutely hit the nail in the head. Unless you live in a self-sufficient homestead in the middle of a forest, there's no such thing as a "self-made man". Take Amazon for instance: they benefit from roads and infrastructure. But they also benefit from things like police and courts to protect their private property, just like they rely on a workforce capable of meeting their demands. Ultimately, they also benefit from a stable society and mostly wealthy enough population to afford their products! And finally, one can say that they benefit from the work of the people who invented the Internet, who invented computers, who made the American Revolution, the ancient Greek philosophers and the medieval mathematicians and Copernicus and Galileo and Newton, in short: directly or indirectly from the combined work of every single human being which lived and has ever lived. That's what's hidden behind the simple word "society". And that's why no person is "self-made".

For this, Amazon reaps enormous profit. They need to pay what's due: they owe a debt to society, for it was society that enabled their profit.

My issue with taxes is that whenever there’s a funding problem, the knee jerk reaction is to increase taxes rather than make the government more efficient. In business, the pressure is always to be more efficient. As a result, the government trends towards bloat, inefficiency, and waste. And when someone suggests (gasp!) eliminating positions rather than raising ever more tax, some people think you are a heartless jerk, rather than an advocate for prudent and frugal use of limited funds.

>some people think you are a heartless jerk

I think this comes down to a fundamental miscommunication. No one is going to believe you are a heartless jerk for advocating for more efficient, effective practices in government. The values judgment comes in when the services being cut are those that provide tangible, critical value to individuals in society - think social welfare programs.

Because cuts are never accompanied by a plan for efficiency, cuts always mean services get worse. Therefore, individuals who receive vital services suffer. Then comes the 'heartless jerk' values judgment.

Maybe all budget cuts need to be precipitated by a process evaluation and bloat reduction.

The issue is, that game is too easy to rig and too tempting to play; for proof, see literally any large corporation's budget and planning processes. Fiefdoms abound.

I don't know how to fix the problem.

I have always said that I would gladly pay 75% of my salary in taxes, as long as everyone in society had easy, equal access to high quality education, quality, safe housing, nutritious, safe food, and high quality, timely healthcare.

The problem is, any society structured to provide those things will immediately be corrupted by greedy, power-hungry people.

Getting a little too philosophical, I think. Anyway. I don't know what the solution is, but I'm hopeful that there is one.

Why does government need to be efficient? The entire point of a government service is that it helps everyone in society, which is necessarily inefficient. Private companies can afford to be efficient because they can refuse service or refuse to enter certain markets.

Just as a note - I'm someone who advocates that government should absolutely be run at a complete loss.

But inefficient and providing service to everyone are not necessarily the same thing. Planned inefficiencies is what are important.

For example - the college I work at knows that we're going to lose our shirts on every nursing student, something to the tune of 25k loss for every student, every year in that program.

And because that is what the area needs, that is what we do. It's massively inefficient. It would, at a for-profit, be the first program to get cut.

But we can plan for that loss, and make up for it in other areas.

That's an efficient and effective inefficiency.

A government needs to be efficient so that instead of spending $2 billion on a bridge to nowhere, or a bureaucracy that spends millions of hours pushing papers but accomplishes nothing of merit by doing so, or a public housing authority that pays its workers to sleep on the job rather than inspect or repair the boilers, or a public employee pension program that gives away millions when you game the system with excessive overtime your last year, or any other myriad ways to waste society’s resources achieving nothing and worse than nothing - instead of that, it gets something valuable done, and society can benefit from that something.

Waste is not virtuous and you cannot prosper by continually breaking and repairing the same windows.

Why is the default assumption that these things are rampant in government and wholly absent in the private sector?

I think anyone who's had a job must realize that some waste goes on in the private sector. but a business that wastes more than it profits will eventually be sold for parts. a government isn't subject to the same constraints and can raise taxes or print money for a long time to paper over the rot.

there's also the argument that it's worse for a government to waste money than it is for a business. if someone runs their own business inefficiently, they are just wasting their own money. if the executives run a publicly-traded business inefficiently, this is a bit worse as they are wasting the shareholders' money. but an inefficient government is wasting everyone's money that they are compelled to contribute.

I disagree with every premise of your argument so I'm not sure if we're just going to talk past each other, but overall I could not disagree more:

>a business that wastes more than it profits will eventually be sold for parts

How many startups linked on this very site throw VC money into furnaces and have nothing to show for it (not even parts) after a few years? Where did all the Yik Yak money go?

>a government isn't subject to the same constraints and can raise taxes or print money for a long time to paper over the rot

Overall that may be true but individual departments and programs are certainly subject to those constraints.

>an inefficient government is wasting everyone's money that they are compelled to contribute

I'm not thrilled about the billions that have been wasted developing the F-35 but that's exactly how representative government works. I don't get a vote in the decisions of Google or Apple.

In this case, it is no particular assumption, but merely the parent comment celebrating public-sector waste.

That's an incredibly uncharitable way of reading my comment and I think you know it.

i'm really not clear what you're alleging and how you're alleging it

I think you are tilting at imaginary dragons considering that the plutocrats and largest corporations in America pay basically nothing in taxes. I don't disagree that government should try to be efficient, but government by its very nature takes on inefficiencies in society... regulations exist because of edge cases, welfare exists because some people are dealt a bad hand, et cetera. Government is not, and should not try to be, a business.

You’re discounting this position based strictly on the fact that the taxes aren’t collected from the company, but companies are made of individuals, both those that work there and those that own shares in the company. They feel the burden of taxes elsewhere. Today, the top 5% of taxpayers pay 60% of federal income taxes. The top 20% will pay 87%.

I'm also discounting this position based on the fact that the prime directive of government is not efficiency.

Do you have a source for your numbers?

It's pretty trivial to find many references with a quick Google search, but here you go:

https://www.ntu.org/foundation/tax-page/who-pays-income-taxe...

It's not on me to find sources for your numbers.

Besides, doing a trivial, quick Google search comes up with a few links to anti-tax lobby groups (such as the one you provided). However, a slightly less trivial, slightly less quick look at the topic reveals that the figures in the anti-tax lobby group reports do not include capital gains, or really anything outside of federal income. It doesn't even include payroll tax.

A few sources, admittedly biased the other way:

- https://www.cbpp.org/research/federal-tax/where-do-federal-t...

- https://theintercept.com/2019/04/13/tax-day-taxes-statistics...

- https://www.washingtonpost.com/business/2019/10/08/first-tim...

- https://www.businessinsider.com/american-billionaires-paid-l...

Well if you read what I wrote, I didn't say that they fund 60%/87% of federal revenue. I said they pay 60%/87% of income taxes.

Since payroll is proportional to income, that's even more federal revenue that is indirectly levied on the labor of the top 5% and 20%.

Once you include capital gains taxes, the top 5% and top 20% cover even more of federal revenue. The only portion of capital gains that isn't personal capital gains is corporate capital gains. A sizable amount of non-individual capital gains are hedge funds and retirement accounts, which once again are mostly funded by many people in the top 5% and 20%.

Any way you slice it, it's largely the top 5% to top 20% of so funding much of the operating costs of USA Inc. Everyone in the bottom 50% gets a 50% say while paying a mere 3% of income taxes and probably even less in taxes once you include all sources of federal revenue.

If we want to talk about individuals, the top wealthiest individuals pay less in taxes proportional to their individual wealth now than they did in the 1980s and 1970s.

It seems weird to want to pivot to individuals being taxed and then comment on how much those individuals pay as a group, and not look at whether or not individuals being taxed are being taxed at a fair rate over time.

> If we want to talk about individuals, the top wealthiest individuals pay less in taxes proportional to their individual wealth now than they did in the 1980s and 1970s.

Yes, and if you look at my other comments here, I'm in favor of all individuals, regardless of wealth paying the exact same in taxes via a flat tax on consumption.

Whatever the flat tax percent is, it should be paid by everyone equally in proportion to their consumption.

That is tricky to implement. What consumption counts for tax purposes? Should luxury items be taxed higher?

For example, poor people have no choice but to eat, and their food costs won't be that much lower than a rich person's food costs (assuming artificially that everyone cooked at home).

Therefore, because rich and poor people will eat about the same amount of food, and the cost will be "about" the same, then the amount of tax paid will be about the same. But as a percentage of the person's income, the poor person will have a drastically higher burden of taxation.

And even if consumption tax proponents were willing to allow for luxury item tax rates, rich people would always have a way around it. For example, would renting an item be taxed the same as buying it? Or what if instead I receive access to my Ferrari as a perk of working for my hedge fund? The poor guy who buys the $2,000 used junker will have to pay consumption tax, but I won't.

For every rule there are probably multiple loopholes. And even if a fair system could be devised, it would never see the light of day because you could never get enough people to agree on what that system would be.

All of this is just pointless thought experimentation anyway; the current corporate-political structure likes the current system much better than they would like any radically different system. Therefore, nothing significant is going to change.

> Should luxury items be taxed higher?

I wouldn't phrase it that way but I could see the argument for exempting only the most basic necessities from taxation such as very basic end-consumer foodstuffs (generic non-organic unbranded flour, eggs, milk, in-season domestic fruits and vegetables, etc, generic commodity processed food goods, if a company slaps a brand on it, it should not be exempt). For housing, maybe the first N dollars of housing costs where N is the median cost of the cheapest 10% of housing stock in a local market.

Whatever the decision that is made, the main thing that needs to be conserved is that everyone that votes should feel the pain of taxation for any consumption above and beyond mere existence. If we don't all feel the burden of paying for governance, how are we all supposed to take the same interest in making sure that that governance is spending taxpayer money wisely. This is especially important in a democracy where the majority can rule. What you can't have is a situation where the majority with the votes doesn't feel the burden of the governance they are voting for. That's a recipe for disaster.

> For example, would renting an item be taxed the same as buying it?

renting is consumption

> Or what if instead I receive access to my Ferrari as a perk of working for my hedge fund?

gifting is consumption. Stuff like this is already stuff that people have to include in their income taxes.

> For every rule there are probably multiple loopholes.

that's no different than for the status quo. loopholes are a fact of life in a system. the more complex the rules, the most loopholes there are

> All of this is just pointless thought experimentation anyway;

I disagree. It's important to identify the shortcomings of the current system and that is that it leads to voters that are drunk on transferism. If you don't identify such shortcomings, you can't fix them.

It would be fine if that’s all we pay for, but politicians find ever increasing ways to buy votes with other people’s money.

If everyone felt the burden of taxes equally via a flat tax based strictly on consumption and consumption alone, I could get behind it. Right now however it’s just robbing Peter to pay Paul. And when Paul is the beneficiary of taxes and relatively unburdened, not only are they supportive of more taxes because it’s not their problem, but they also care not about the efficiency of how wisely those tax dollars are spent because it’s Peter footing the bill.

If everyone felt the burden of taxes equally via a flat tax based on consumption, the poor would be taxed proportionally the highest, the middle classes would also be worse off than now, and the richest few percent would love this as their proportion of income that goes on consumption is the lowest.

It’s a massively regressive idea and pretty much by definition a flat tax based on consumption would not be felt equally at all.

"flat tax" is a red herring that happens to be very appealing to a certain cluster of political ideologies. it's not necessarily regressive though. imagine a flat consumption tax where 90% of the proceeds were allocated to services for the bottom quintile. that would actually be quite a progressive tax system!

that aside, my armchair economist opinion is that consumption is not a very good place to collect taxes in the first place. you want people to buy stuff from each other, don't discourage this!

> imagine a flat consumption tax where 90% of the proceeds were allocated to services for the bottom quintile

You'd still end up with the middle paying proportionally a lot more than the wealthiest.

But yeah, in general I agree, I guess maybe that certain political mindset latches onto it as it appears to be an easy/straightforward place to apply it.

> You'd still end up with the middle paying proportionally a lot more than the wealthiest.

Again, everyone ends up paying proportionally the exact same on what they personally benefit from: consumption.

What isn't consumed regardless of income goes back into circulation in the economy via investment.

> Again, everyone ends up paying proportionally the exact same on what they personally benefit from: consumption.

But they don't pay in proportion to what they earn or their wealth. Compared to the current system it would leave the poor paying a much higher proportion of taxes and a higher percentage of their income as tax, both compared to now and compared to those who earn more.

> What isn't consumed regardless of income goes back into circulation in the economy via investment.

Great, so the wealthy , who consume proportionally less, get to invest and grow their wealth unfettered, while those on low incomes get to increase their share of the tax burden.

Nice. Sounds 'fair'.

not that I really disagree with you, but "fair" isn't an argument; it's an opinion. you're clearly arguing with someone who doesn't agree with using income/wealth as a criterion for fairness.

It was more of a dig at some of the previous attempts at mooting such taxes, the "Fair Tax" was one of them.

I agree it's an alternate way to approach fairness, I just find it a bizarre one. If taxes are to stay at roughly the same gross take as they do now in, for instance, the UK, VAT would have to rise from 20% to approximately 100%, which would be utterly ruinous for the poorest, but barely noticed by others.

This. In my opinion, fairness requires having skin in the game. Lots of people have a say in how money is spent via votes but are not feeling the burden of contributing to that pot. Contributing proportionally would give them skin in the game and they would all of a sudden discover the importance of demanding fiscal responsibility from those that are governing.

The progressive taxation approach doesn't even leave those at the bottom better off. The market still uses price discovery to figure out prices. All the progressive taxation approach does is eliminate a cost and lower the price of labor to be equal to what labor is demanding. If labor had to also pay their fair share of taxes, they'd demand the amount they need plus the amount they need to pay in taxes.

An alternative that achieves fairness is to have no income tax and instead only have payroll taxes. This way no individual is bilked because they were successful.

I still prefer a flat sales tax because you shouldn't tax what you want to see more of in society, the labor to make society work, but only having a payroll tax would at least solve the fairness issue.

The only problem with the payroll tax approach is that the skin in the game expectation has one drawback. Those that are in most demand in the jobs marketplace is at the least risk of advocating for a higher payroll tax across the board. Raising the payroll taxes could make some roles no longer profitable and companies could cut those roles to achieve a better ROI.

> In my opinion, fairness requires having skin in the game.

Everyone has skin in the game, it's called 'life'.

> Contributing proportionally would give them skin in the game

They do contribute proportionally, they have very little so that contribution is low. In general this is done because if you take the same proportion from the worst off as you do from the richest, the poor starve.

> they would all of a sudden discover the importance of demanding fiscal responsibility from those that are governing.

While they starve because of the new tax regime. I imagine the first thing they'll demand is that their taxes get lowered so that they can live, so back to square one. If there aren't just food riots first. Also it looks like you're mooting introducing some sort of unbreakable, unchangeable law so that people would demand other changes. I'm not sure that's how democracy works...

> you shouldn't tax what you want to see more of in society

You don't want commerce?

You realise that to support your scheme, sales tax would have to go up to the region of 100%?

> Again, everyone ends up paying proportionally the exact same on what they personally benefit from: consumption.

this is only true under a very narrow definition of "benefit". I benefit from a lot of things that are hard to account for with a system of taxes on transactions (what I assume you mean by "consumption tax", correct me if I'm misunderstanding you). I benefit from roads when I drive on them, police when I don't get shot on my way to work, the military when my country isn't invaded by a foreign power, etc. you could certainly expand the definition of consumption to include these things, but it would become very difficult to account for.

> you want people to buy stuff from each other, don't discourage this!

Yes, you do, but the goal of politicians is to convince the populace that their proposed larger collective reinvestments will be more valuable to taxpayers than the taxpayer's individual conspicuous consumption.

You want both consumption by individuals and investment by (1) companies, (2) the government and (3) individuals.

Investment in the future always comes from foregoing consumption in the present.

When you tax private investment to make a public investment, you're not getting more investment, you're actually getting less investment since the amount you collect to reinvest is diminished by the cost of the bureaucracy used to collect that tax money and divert those tax dollars to other investments. It wasteful massively wasteful to tax investments to make investments.

> the poor would be taxed proportionally the highest

No, they would be taxed proportionally the same. You're starting from the assumption that income is what should be taxed. Income comes from productive activity (labor or investments) and is what you want more of, not less.

> and the richest few percent would love this as their proportion of income that goes on consumption is the lowest.

And what is happening with the rest of the money? It's being reinvested, which is something you want in society.

At the end of the day, the money is only ever used/enjoyed personally by rich (and poor alike) when they consume.

> No, they would be taxed proportionally the same.

No, they wouldn't. The poorer you are, the more of your money goes towards consumption of the necessities of life and therefore the higher proportion of your available funds goes to tax under such a system.

> You're starting from the assumption that income is what should be taxed.

No, I'm starting from the definition of progressive taxation and telling you, accurately, that your scheme is a recipe for regressive taxation as it disproportionately affects the worse off.

Even the ludicrous "Fair Tax" proposals made 15-20 years ago made concessions to this, in proposing that the least well off would be refunded all or some of their taxes.

The whole point of taxes is to normalize quality of life in society.

I disagree on a very low level with this statement. The purpose of taxes is to fund the government budget.

Yep. The purpose of taxes is building up the treasury, so that the people in power can keep being in power.

https://www.youtube.com/watch?v=rStL7niR7gs

Politicians wouldn't be buying votes if voters weren't selling them. The fish rots from the head and the head is "the people".

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