Hacker News Reader

Comment by kasperni | Hacker News Reader

> the answer is technical inertia (or technical debt, if you will)

One of the issues. There are number of others. For example, VAT is a value-based tax. A VAT cut gives the biggest savings to people who spend the most. Since wealthier people typically spend more, they would save more money in absolute terms. For example, a family with a food budget of 3,000 kr. would save 300 kr., while a family with a food budget of 8,000 kr. would save 800 kr. Politically, some parties might prefer tax breaks that focused on lower-income groups.

Another issue, will the cost savings actually be passed on to the consumer?

View on HN

VAT can be considered a regressive tax because the poorer I am, the more of my money I spend on goods and services, and the less on savings and investments. As a proportion of income, poor people spend more on VAT than rich people. I think it’s about double, in the UK. So you’re right that cutting VAT helps richer people more in absolute terms. But in terms of of quality of life it helps poorer people more.

[edit] assuming we’re talking about VAT on things that everyone buys. Which is why tax codes often exempt essential items from VAT.

You can do both, in that you can have a system where if you make less than X, you don’t pay VAT on certain things, or less.

California is now doing this for electric car rebates. Only works for items pinned to a person.

This can easily be compensated for by simply giving the poor more rebate on income tax.

Give people as a whole more money and they can spend it on housing. Given the decades long supply problem with housing it simply means rents increase to fill the void.

I was under the impression that VAT taxes are considered to impact mostly the poor. While in absolute terms the rich are impacted most, in percentage terms VAT is considered a much smaller portion of expenses for the rich than the poor. I quote: "VAT is a regressive tax, putting more burden to the poor than to the rich. Indeed, VAT applies the same rate to everyone regardless of their level of wealth – but the richer you are, the lower the proportion of your revenue goes to consumption."

In the U.K. most living expenses are don’t get charged vat, or get charged at a low rate - food, rent, public transport are vat free, electric, gas are low rated.

Hmm. You say "tax break" but I could argue split VAT results in the opposite: a hike in consumption tax. The base VAT rate can be set higher if the VAT on desirable consumption is lower. I.e. it's not that rich people pay less tax for books -- it's that rich people pay more tax for non-books!

Denmark already has one of the largest VAT rates in the EU (25%) - only surpassed by Finland (25.5%) and Hungary (27%). (I guess you may also argue that those two countries have reduced rates and that proves your point!)

I find this logic extremely flawed. If you save half, you save half. If someone saves a lot more than you as a result, it mains they paid a lot more before, and is still paying a lot more than you now. As fair as it gets. Those that complain are usually imagining a robin-hood esque system where the tax progresses towards 100% as income goes up.

Trying to heavily tax billionaires is one thing, but the issue with them is tax avoidance by virtue of these complicated systems, and a lot of the incremental taxes land on people just plain working their ass off, getting no sleep, high stress and high blood pressure as a result. If someone has more because they worked more, they're entitled to exactly that.

Incremental tax also means that if you have a good year and a bad year you pay way more tax than if you just had two average years. Not to mention that such complicated tax is what enables tax optimization whereby those higher up can end up paying less tax. It's stupid.

Reply on news.ycombinator.com