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Comment by malandrew | Hacker News Reader

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.

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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.

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

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

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