Progressive consumption tax is ridiculous. It requires your tax rate at the point of sale to be dependent on all your purchases to that point in time. That's just not practical. Or it may require every purchase you make to be recorded for tax-time when you then pay the taxes. Either way it requires the government to know every purchase you make, or at least the price. This is not something anyone should want.
There are plenty of ways to scam such a system. For example, you could create a phony investment fund which always collapsed at the end of the year creating a loss which hid your expenditures.
That might be true. I don't actually know how much more auditing of funds and brokerages than what goes on already would have to happen in order to prevent that sort of thing.
I don't think the problem is obviously insurmountable, though.
There are three mechanisms for implementing a progressive consumption tax outlined here[1] and none of them involve keeping track of all purchases. I would imagine that Robert Frank also has a sane proposal.
Those aren't even purely consumption based. Also, the whole thing is an attempt to remove taxes on interest. The author talks a lot about how terrible it is to "tax savings" which we don't do - we tax interest. The problem is if you remove tax on dividends and interest you will split to world in short order into those who have savings and those that don't.
Typically people opposed to this will point out that everyone spends money, but only people with assets have extra income from their assets. So someone who spends 100 percent of his income is going to be taxed on 100 percent of his income, while someone who has the same income and spends the same amount but happens to have a million dollars collecting rents will pay tax on a substantially lower portion of his "income". To that the response is always that it needs to be a progressive tax or offer a rebate for those poor people. At that point it's just a way to fuck the middle class, keep the poor working paycheck to paycheck, and let the rich increase their fortunes through rents.
These guys need to run simulations to show how a closed system works - you'll quickly see a bifurcation under those circumstances and they know it.
I think this part of the discussion is really interesting. After all, this is about discussing an actual solution to the problem of "extreme luck" (good or bad).
I don't see your point, however. The authors explicitly say it should be a progressive tax and that income tax should be removed. That does not include removing tax on capital gains.
So I understand the idea as taxing consumption after it reaches some minimal threshold, and otherwise only tax income from wealth. I don't see how that would affect the lower ranges of income other than that they suddenly would be relived of all tax burdens, and in particular, of their by far highest tax rate: the VAT. I also don't see how that "fucks the middle class" - for them, these changes should be mostly transparent. That is, for them, VAT and income tax will just be called differently, but the overall rate still should be about the same.
The real problem arises with the rich, naturally, because their VAT will suddenly skyrocket. In other words, as the rich and powerful rule the world, this is yet another proposal that can't happen without some pain...
Not necessarily. Just tax things that are not needed for daily life with a VAT that grows progressive in proportion to how far removed from "life support" it is.
For example, tax yacht's and private jets, and fancy cars with some really insane rates, while tax something that is a limited resource but necessary to live with a very low tax rate or none at all. Tax first homes lower, second homes much higher, and third+ homes at insane rates. ASF.
I.e., I really see no need of keeping track of actual spending beyond what we are doing already. Plus, after removing income tax, the IRS only needs to keep track of your capital gains, not your income. So the savings from that in and of itself should bring a boost to the economy.
Although, this decreases money supply which makes everyone's savings worth more at the expense of slowing economic growth. Slower growth may be undesirable to many, especially startups, but could have positive environmental effects.
There are other approaches though – you could charge a sales tax for all purchases and institute a universal rebate, which would have the same effect with the addition that people underneath the spending threshold would have an effective negative sales tax rate.
Maybe I wasn't clear – rebate doesn't need to be connected to purchase amount. A flat, fixed-value rebate serves a similar purpose if it is appropriately set, and individuals who don't meet a particular threshold will receive more money through rebate than they pay in sales tax.
Only the consumer needs to do so in this case, not the government, and if you don't keep track of your own purchases, no problem, you just don't get the rebate.
Tracking purchases requires time and skill, both of which are often lacking in the poorest. Rich would hire a person to do it. (and also to game the system)
Not really, no. Or rather, the ability to do that is not so much tied to wealth as education and upbringing: you have to be functionally literate and numerate in order to do that, and many of the people who would need the most support aren't.
Many more have the basic numeracy but lack the background to plan finances at all. The UK government recently changed the way they pay rent for people with housing benefit. Instead of direct to the landlord they pay a lump each month, while rent is typically due weekly. Many have fallen into arrears as a result: they didn't want to be given the money, and they don't know how to deal with having a balance in their account that they must budget.
Perhaps you might consider someone unable to cope with that change unworthy of support, but when there's a whole class of affected people I don't think it's helpful to write them off as a group, rather than trying to understand the reason why they find it hard and trying to set up the system to mitigate those difficulties -- just like if your users fail to understand a feature in your project, you'd be wise to redesign it to be usable. Only with somewhat higher stakes.
Proving "average spending" to the government is going to require informing them of all your purchases - which is what I was complaining about and you were supposed to refute. You also brought income back into the picture, followed by UBI.
