Progressive taxation benefits society at large.
... claim the poor and the people who make their money off capital gains.
Who gets to decide what "good for society" means in context of taxation is possibly the most political question out there. It is not at all obvious that making the most productive people pay most of the burden gets to the best outcome.
the opposite arrow is not necessarily true, but one wonders if there isn't a 'baby with the bathwater' effect with progressive taxation.
As a software dev that can be a hard pill to swallow.
It is one philosophy that there exists some line, some fuzzy DMZ that gets crossed between being merely "wealthy and more prosperous than others" and obscene. Colloquially that seems to be "billionaire" but I bet a lot of people on the farther-left would define is somewhere north of $10 million.
Especially in a country so far behind the rest of the developed world with regards to access to health-care and housing for so many millions of people.
Though, of course, you then need even more reporting than we already have, but it would have the upside of no longer disincentivizing work like the current system does, and rewarding savings over spending too.
And from the perspective of someone who actually works in tax: the "FairTax" simply pushes all the complexity to everyday transactions, instead of minimizing it to periodic transactions occurring 1-2 times a month (with reporting once a year). It would hugely disincentive paying for actual things, and artificially incentivize (untaxed) services over (heavily taxed) goods.
Moreover, the "FairTax" rate would be 30% or more on all purchases. Not only would the FairTax would obscenely regressive in effect, but a tax rate that large would push a substantial portion of the economy underground!
There's so much wrong with "FairTax" that it should be called "Ridiculous Tax."
While I agree with much of your post, current taxes on income (featuring reduced taxes on capital income, exclusion of most income from gifts/inheritances, and supplemental taxes on labor income [“payroll tax”]) absolutely disincentivize working for income if you have choices of how to get income. Now, lots of people don't have choices and are stuck with work, but that doesn't mean there is no disincentive effect.
(Of course, “treat income as income” makes this much fairer than the status quo, much less the laughably misnamed “FairTax”.)
(Note: payroll taxes such as FICA, etc., actually phase out pretty quickly after $100k in earnings, so they're regressive in nature. There is the high-wage supplemental tax, but this is offset by the cap on income subject to SSI tax, so workers earnings more than $140k actually pay less in payroll tax.)
That being said, I agree that capital gains should be treated as regular income (as it was historically, pre-Reagan) and that income received via gift/inheritance should not receive a FMV cost basis.
I think the people who argue for higher taxes on wealthier brackets also argue for capital gains to be taxed at a similar/equal rate to income.
The actual effect is that you need to actually have a huge wealth disparity between partners' earnings for the so-called marriage penalty to kick-in. Fox News notwithstanding, the overwhelming majority of married couples will not see a marriage penalty.
Even if you did not mean to suggest FairTax and you mean something very different, your proposal still ends up being significantly more complicated than an income tax, since now taxpayers must track all purchases made over the year rather than the relatively limited sources of income they have. Your proposal would increase the compliance burden on buyers, sellers, and the government.
By not tracking purchases individually, and only inferring the total amount of money spent by subtracting savings from income, you can also apply brackets to purchases, and thus avoid the regressive nature of a "simple" flat sales tax.
Not to mention there are many efficiencies that come with this system which would likely cause prices to even out over time near their current levels or just slightly higher.
Savings: unknown (held in cryptocurrency, private)
Tax: divide by zero error
Besides, doesn't the US already have sales taxes? Or are they state-only? I'm starting to favor a tax on real estate and/or land value, since that's physically impossible to hide.
State. City. County. Sub-divisions of same that are special sales tax districts and have extra sales tax applied. Not every instance of those entities applies a sales tax, but any could and many do. Basically everything except federal. The sales tax where I am, in a "red" state, is about 11% (we actually have a really high effective all-inclusive tax rate in this state, for how entirely shitty government services and infrastructure are)
> I'm starting to favor a tax on real estate and/or land value, since that's physically impossible to hide.
The challenge with that is the system for assigning value—everything else about it is easy. We already have something close to what you'd need in the US because real estate property taxes are common. That system's not perfect but it may still be good-enough, despite its flaws. It seems to work kinda OK. That might change if that became a more important revenue source, and for more levels of government, though.
There will always be a black market, but eventually that money has to flow back into the regular economy (food, housing, etc...) and will be taxed.