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Comment by pradn | Hacker News Reader

The problem with taxing products higher is that it essentially becomes a regressive tax on the poor. If milk is $2 more expensive per gallon, that hits a poorer person much more than a rich person. This is why it's a hard sell to tax goods everyone relies on, like food, oil, and electricity. You could possibly then give a subsidy to lower-income people, but it's hard to track exactly how much a person spent on smaller items throughout the year.

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It's not a tax on products (like VAT), it's a tax on specific difficult to acquire resources.

The costs of some things that you mention (oil, electricity) might well go up, but the costs of others might stay the same or drop depending on how much of their cost if attributable to labour costs. Locally sourced food might go down in price.

These price changes are exactly what the tax aims to achieve (e.g. lower energy use)

As some other commenters have pointed out, those particularly hard up can be compensated in some other way (e.g. tax credits).

> These price changes are exactly what the tax aims to achieve (e.g. lower energy use)

OK, come be poor in eastern Montana, with no public transit (hello, increased gas tax!), food that has to be trucked in (hello, increased gas tax!), long dark winters (goodbye, solar!), and cold winters (hello, increased propane tax!).

Just because a group is a minority doesn't mean it deserves to get screwed over. It's MLK Day here in America, so it surprises me that this even needs to be said anymore.

Protip: Don't live far from infrastructure and expect it to be subsidized through tax policy.

Tax code artificially makes for "terrible geographic selections". You aren't very far from "Well of course you got raped, look at what you're wearing" logic.

No, its not tax code. Its expensive to drag food to the middle of nowhere. Its expensive to drag fuel to the middle of nowhere. Both have externalities that aren't paid for.

It is not anyone's right to have everyone pay for their choice to live far from infrastructure that already has a sunk cost.

cbd1984 specifically mentions tax, so yeah - it is tax code. In absence of tax the cost would naturally be higher, and that is the price you pay for living in a remote location - but that is a real economic cost of moving the resources. Tax is completely artificial and if the stated goal is a progressive structure, than this is an obvious case of stated goals not matching reality.

Ok so I go and choose the most distant area, so now everyone is expected to pay to ship goods to me?

How could you possibly arrive at that conclusion?

OK, how do you expect people to farm and ranch if you don't allow farmers and ranchers to live on their land?

You can solve one problem by mandating universal veganism and banning the keeping of pets which are obligate carnivores (cats, mainly), but that just increases the demand for farmers and farming.

I don't mean to be dismissive of the struggles that people in rural areas face, but I don't think that's an apt comparison. There's a difference between being disadvantaged by location (which can be changed) and disadvantaged by ethnicity. Also, Montana residents are free to use the white drinking fountains.

The poor are far better off in Saskatchewan a few miles north of you with it's high gas taxes and generous social safety net.

I liked the FairTax proposal - subsidy is given to everyone regardless of income level or spending and is enough to cover the tax on necessities. Of course it's never going to happen.

FairTax's motto: "because the rich don't have enough advantages already"

edit: Downvotes? Seriously? FairTax shifts the burden dramatically onto the middle class. A rich person pays no capital gains, and as long as they don't go buying billion dollar yachts, they'll pay next to nothing percentage-wise.

The FairTax replaces all taxes and the prebate makes it progressive. The rich actually have no net benefit because in the income tax world, they're still rich and in the fairtax world, they're still rich. What progressive income taxation says is that you want to pull down the rich to bring up the poor. We need to pull up the poor and leave the rich alone. The rich have their wealth and will continue to maintain it. A tax plan should be transparent and it should allow the poor to save money and invest their way out of being poor.

If the rich aren't pulling up the poor, who is? The middle class? I like the "it's progressive! progressive is bad!", incidentally.

I'd vote for any system that gives the poor more opportunity to pull themselves up. With FairTax they would have more income, pay no tax on essentials, could save/invest more, and reduce dependence on the government. That combined with no capital gains makes investment attractive to all classes.

If you give someone the opportunity, but they choose to remain poor then it is not the government's job to take care of them.

If however you do not give them that opportunity then we are just encouraging the poor to stay poor and depend on the government.

I have to imagine no capital gains would have more meaning to the middle class saving for retirement as compared to a wealthy person netting 15% more.

Lastly - expenditures are at least linear with regards to income if not exponential past $150k looking at a recent census. If you read the FairTax proposal it states that the rich would end up paying more tax overall then they do today.

The poor don't tend to have the money to invest in things that generate capital gains in any meaningful capacity. That such a thing is touted as a benefit for the poor is indicative of either disingenuousness or naïveté on the part of FairTax backers.

FactCheck.org has a well researched and well citied piece at http://www.factcheck.org/2007/05/unspinning-the-fairtax/. Among the findings - anyone making between $15-30k and $200k suffers under the plan, while the rich see their tax burden drop dramatically.

I read the article in its entirety. While what they propose (a very small fractional increase in taxes among the middle class) is entirely plausible, it misses the point entirely.

A consumption tax is optional. Meaning I only pay that tax if I consume above a poverty level. An income tax however is not. If I earn an income, I pay the tax.

The reason this is such a big deal is that it empowers the individual to change their financial situation. For example my taxes may decrease by 50% under FairTax, simply because I live a simple life style.

If someone chooses to improve their situation, they can take all the extra money, save, invest without capital gains, and see the turnaround much quicker.

This is in contrast to today's system which penalizes saving & investment and HEAVILY penalizes those who go out and start a business (I pay quite a bit more tax as a self employed individual).

It is also much more logical to be penalized for consumption vs. contributing to society (similar to the OP).

Every redistribution of the tax burden has winners and losers. With the FairTax, it's not poor people who consume very little because they get a bigger subsidy than before. It's not those people who make far more money in a year than they can possibly spend (especially once you cut the now tax-free real estate[1] and lavish consumption on foreign holidays out of the picture). It's the average working person.

[1]I've yet to see a sane argument for why you'd want to give property speculation a massive tax advantage over buying and selling consumer goods

The issue of tax burden is that the only loser are the people. Government issues taxes and can enforce it violently, so Government is the only winner in the tax game. For the wealthy, the move to a FairTax is neutral they don't benefit from it just as they don't have the same negative effects that a progressive system has with its loopholes. Also, we need to stop thinking that our economy will get better if we somehow increase the tax burden on the rich. What we need to start thinking is how to improve the plight of the poor and the needy.

The reason why I supported the FairTax because of the prebate and it increases the purchasing power of the poor. When the poor can keep 100% of their pay, they control what they can spend on. For the middle class, the same deal: we can have families improve their lives, save up for college, be masters of their spending, and pave the way for more charity. The rich will continue being rich, regardless but if we can ease the tax burden on the middle class and the poor by removing income taxes it'd be a big break.

Same here, the FairTax is a pretty good idea. I believe that Bill Gates even advocated that the US shift away from income based taxation to consumption base. If there's anything our economy that we can bank on, it will be consumption.

Resources != Products; they're talking about taxing things like crude oil and lumber, not milk and eggs.

We can expect an increase in the cost of inputs for essential consumer goods to be passed on to the customers in the form of higher prices for those products. Dairies, meat processors, and supermarkets are not going to just sit there and take the loss.

Yet at the same time, the labor gone into processing / handling manufacturing those consumer goods will be cheaper, possibly offsetting that rise in material costs. An increase in resource taxes doesn't necessarily mean an increase in consumer good prices.

The labor will not be cheaper.

Just because you tax labor less, does not mean salaries necessarily go down. The cost of labor is primarily a function of supply and demand + overall competitiveness of your economy on the global stage.

In fact if you increase the cost of consumer goods by pushing up the cost of manufacturing inputs, you're going to have to pay workers more to maintain the same standard of living. Their cost to drive to work goes up; their cost to feed themselves goes up; their cost to buy a house goes up; etc.

> An increase in resource taxes doesn't necessarily mean an increase in consumer good prices.

Because income tax is taken out of a worker's gross pay, the Ex'tax plan is not going to substantially impact how much companies pay their workers. It will simply increase take-home pay. Assuming it's a revenue-neutral tax shift, three things happen:

- Workers with low incomes get a little bit more take-home money every month.

- Workers with high incomes get a lot more take-home money every month.

- Milk and eggs are uniformly more expensive.

That's why this is a regressive move that hurts people with low incomes.

If you increase the cost of natural resources, you are going to increase the cost of milk and eggs.

And you make less industrialized, more labor intensive forms of producing eggs or milk more economical than higher industrialized, lower labor forms.

That's solvable with negative income tax.

Only because we live in a very artificial economy. In reality milk should cost less than a dollar a gallon but for artificial scarcity.

Is that really true? I guess I've always seen the meme that our (in the US, that is) food is artificially cheap, because of subsidies for farmers and ag companies.

Or does your "artificial scarcity" phrase really just mean "regulations keeping me from selling water with white food coloring in it and calling it milk?"

It is really true.

http://www.cato.org/publications/commentary/milk-cartel-econ...

Not sure why I'm getting a shit-ton of downvotes. A lot of negativity on HN lately.

Its rude to downvote without explaining why, if it requires domain specific knowledge. I can't speak for the downvoters but I do know from my gentleman farmer relative (I guess they call them hobby farmers now...) that's a very old article and a couple years after that one of the omnibus farm bills completely eliminated the milk price support. So your justification is a .gov program that no longer exists as of roughly the 9/11 attack era.

Everything about .gov manipulation of farmers is controversial. Milk's been a free-er market than most for about 15 years now. Corn for example is still corrupt as all heck leading to everything from obesity to anti-biotic resistances. But milk is currently a free-er market than most.

And of course corn is the primary feedstock for milk cows, leading to artificially cheap milk.

I didn't downvote, but I assume it's because you're making a strong counterfactual* assertion without any support or reasoning, and reasoning in counterfactuals requires strong assumptions about causality. These causal assumptions are highly contentious, rarely agreed upon, and almost never supported except by the barest loincloth of evidence, as evidenced by your cato.org link.

It was such an out there statement that it seemed like trolling to me, which is why I didn't even bother to downvote, and assumed that others would take care of it.

* Counterfactual in the sense is that it is about a world that does not currently exist.

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