Hacker News Reader

Comment by synergy20 | Hacker News Reader

what about the old plan as just-the-sales-tax(local+state+federal), so nobody needs to file anything, and no need of IRS at all.

    * flat-tax-rate as the default,itemized if you prefer:
        * charge less for regular food, educational and medical expenses
        * charge a little more for travel and non-essential leisure expenses
        * charge even more for luxury expenses
        * charge nothing before your spend reach a certain point, e.g. $5000

Someone has to figure out how to design the tax rate, point is that, we no longer need the IRS and annual or quarterly tax reports.

There are a few states did well with no income tax(just sales tax and property tax), the nation could do the same, don't forget to short Intuit if this happens.

View on HN

It disproportionately taxes poor people over rich people.

Also, how do you report how much you've spent to the IRS? That seems even harder. Some people have suggested a "prebate" of a payment that people get that helps with their first part of the sales tax, but that breaks down after a while.

There are also the same problems of "under the table" behavior.

>It disproportionately taxes poor people over rich people.

I always hear this said about national sales taxes, but it just doesn’t really jive with me as valid. It really seems to make the assumption that consumption doesn’t actually increase based upon how wealthy you are. When it obviously does. I don’t know many poor folks buying super cars, yachts, airplanes, and multimillion dollar homes. Yet I know a few wealthy folks with multiple of each.

This is where our instincts fail us. https://www.taxpolicycenter.org/briefing-book/who-bears-burd... at the bottom (Figure 1) shows that the top quintile would have their share of current federal income tax move from 84% to 65%. The lowest quintile would have a disproportionate impact for them, but would not move the needle on actual revenue. (Right now they have a negative impact due to the EITC. This doesn't take into account social security and medicare, mind you.)

The middle three quintiles would see their tax burden increase significantly. Consider that taxes are only 10 or 15% after your deduction until you get into the third quintile. The proposed sales tax would have to be 22% to be revenue neutral. If there is some sort of offset to disadvantaged households, you would need a 34% tax to sustain revenue.

So their tax burden would go up.

We don't really internalize how much more the top income brackets make and don't spend. The top 1% of Americans have about 16 times more wealth than the bottom 50%. https://www.cnbc.com/2021/06/23/how-much-wealth-top-1percent... - Their effective tax rate is going to be above 22% today, so even if they spent every last dime their taxes would go down, and as we know the wealthy are able to save more, so their tax burden will go down further still.

The thing is poor people have to spend all their income, wealthy people don't. So poor people have all their income taxed, while wealthy people surely aren't spending their last dollar on yachts for the most part. Wealthy people have lots of leftover income to invest and make yet even more money instead. At least with an income tax you can ensure no one pays taxes on their first $x and such.

Still doesn’t jive. Taxes are there to fund government, not punish success. Whether or not you have a large income or a small one, your consumption is what it is and to a degree can be controlled.

Why not only tax finite resources like land & oil or sin taxes only or something else instead? Main differences that come to mind are tax collecting efficiency and value judgement. Is it better to punish the poor by having all their income effectively taxed so that we can avoid punishing the rich? Someone has to have the burden, and every additional dollar is worth less to someone with lots of dollars. But there's also the effects. Consumption taxes make a lot of sense in touristy areas, but do large swaths of society want a tax system that reduces class mobility? There are always discussions how to get around it, like give everyone a monthly payment to make up the difference, don't apply the tax to certain things, etc., but they're work arounds.

How does it reduce class mobility?

It obviously doesn't scale linearly though.

Take the poor family living paycheck to paycheck - they spend practically every cent they earn on the basic necessities. Whereas I find it highly doubtful that your wealthy friends are spending every single dollar they earn every year (surely they save/invest a large percentage of their earnings, right?)

If I'm wealthy, it's most likely that I own a business. If I have a business, then it will have bought that airplane, yacht or car all as tax-deductible purchases. Business then lets me use those at its discretion. My personal car can be an '87 Chevette.

Best example I'm personally familiar with is the carpenter whose Corvette was a company car.

All of those things are still purchased though, whether it’s a company or an individual. Personally I thought the purpose of taxes was to provide the government its funding, not punish.

I was addressing the point about wealthy people paying more in sales taxes than the poor. That is correct, but if you have access to the wider range of tax shelters that the wealthy do, more of your expenses can be tax deductible.

I agree that taxes shouldn't be punitive, but that's another discussion.

3 people. One makes $40k/year, one makes 100k/year, the last makes $200k/year.

If you implement a nationwide sales tax of 10-15% which of these have you just put into poverty?

Revenue neutral national sales tax would be 22%. https://www.taxpolicycenter.org/briefing-book/who-bears-burd...

None, even if the $40k a year spends every penny they are still well above the average poverty rate for the US, unless the household has more than 4 individuals.

There have been a number of studies done that demonstrate that a consumption tax (which is effectively what this is) is considered to be regressive because they disproportionately affect poor people.

I'm all for simplifying the tax code (e.g. eliminating many deductions) as long as we also eliminate loopholes that rich people often use to avoid paying taxes on their income.

People still file sales taxes, just not individual. It's the duty of the business doing the selling to collect the sales tax, file, and transmit those funds to the state.

As long as we have taxes we will need a tax collector (i.e. the IRS) to handle all the filings and to make sure people are paying their taxes.

The IRS absolutely could be doing more. They could let you log-in to a portal with your tax return prefilled out based on all the filings done by your employer. But the tax preparation industry has lobbied against this, and the IRS is underfunded (they still haven't processed all of last year's paper returns).

Also a lot of states that don't have income tax, receive lots of federal funding.... Which comes from income taxes.

> so nobody needs to file anything

Most of us would need to do very little filing-related work every year if anti-tax politicians who think their crusade is worth wasting hundreds of person-lifetimes of hours every single year, and tax prep companies' lobbyists (probably with, ah, some overlap between these two causes) would stop standing in the way, no major overhaul of the tax code required.

Reply on news.ycombinator.com