Fair Taxation

[DinoDoc]

Bah! I have enough problems paying State sales taxes. Screw paying a Federal sales tax on top of that!

[KrazyHorse]

Originally posted by David Floyd


Sounds like someone needs a dictionary.

Regressive taxes would mean that the rich are taxed at a lower percentage than the poor. These are equal taxes, and although they are still unfair, at least this way everyone is getting screwed equally, instead of the poor and middle class making out at the expense of the upper class.

Because the rich spend less of their income than the poor do?

[David Floyd]

Sorry, don't see your point. We're talking about equal taxation, not equal amounts of wealth. Naturally poor people are poorer than rich people.

[Alexander's Horse]

Originally posted by David Floyd


Sounds like someone needs a dictionary.

Regressive taxes would mean that the rich are taxed at a lower percentage than the poor. These are equal taxes, and although they are still unfair, at least this way everyone is getting screwed equally, instead of the poor and middle class making out at the expense of the upper class.

*shakes head*

[loinburger]

Originally posted by David Floyd
Sounds like someone needs a dictionary.

Regressive Tax: A tax that takes a larger percentage of the income of low-income people than of high-income people.

If people with low incomes spend 100% of their incomes on consumer goods, while people with high incomes spend 10% of their incomes on consumer goods, then the poor would essentially be subject to a 23% income tax while the rich would essentially be subject to a 2.3% income tax. Hence, a regressive tax.

[KrazyHorse]

You have problems with math?

Assume rich people save 20% of what they earn
Assume poor people save 10% of what they earn

Rich people will pay 0.23*0.8 = 18.4% of their income in taxes

Poor people will pay 0.23*0.9 = 20.7% of their income in taxes

The actual difference in savings rates is probably a lot higher, so the difference is bigger.

[KrazyHorse]

i.e. what loinburger said

[David Floyd]

Regressive Tax: A tax that takes a larger percentage of the income of low-income people than of high-income people.

That's a misuse of the word "regressive".

If people with low incomes spend 100% of their incomes on consumer goods, while people with high incomes spend 10% of their incomes on consumer goods, then the poor would essentially be subject to a 23% income tax while the rich would essentially be subject to a 2.3% income tax. Hence, a regressive tax.

Untrue. There would be no income tax. They'd both be subject to the same 23% consumption tax.

Frogger,

The point of taxes is not to punish wealth acquisition, but to fund government, correct? Therefore, what do you care who ends up with more disposable income?

[KrazyHorse]

Originally posted by David Floyd


That's a misuse of the word "regressive".

Do a google search on the words "regressive taxation"

You have no clue what you're talking about.

[David Floyd]

No, I fully understand that over the years, the word "regressive" has been hijacked, and that is precisely the point - it is called regressive taxation because it's supposed to be "bad", and "regressive" has negative connotations.

[Goingonit]

To put this into a more concrete economic perspective: Economic activity (measured by GDP) is a flow. GDP can be measured either by income or expenditure, and for real GDP, both are equal. So if you want to tax economic activity (basically, the government skimming off the top of the flow of goods and services) you can do so from either end: you can tax income or you can tax expenditures. Economically, both should be the same: they both tax the same thing.

The big differnece, however, is that taxing consumer goods is not taxing expenditures: it is far easier to remove money from a consumer tax than from an income tax by investing it; expenditure equals consumption plus investment. However, Investment can only be done by those who can afford things that are not necessities of life: naturally, lower income groups spend more money on food and shelter.

So, low-income groups pay essentially what they would under a flat-tax system (since income equals consumer expenditure) but high-income groups pay less (since for them income equals savings plus consumer expenditure). So it is acutally a regressive tax structure.

[loinburger]

Originally posted by David Floyd
That's a misuse of the word "regressive".

Lodge your complaints with the people who run this site, along with this one, this one, this one, and the other six billion people on the internet who use the correct definition of the term.

Untrue. There would be no income tax. They'd both be subject to the same 23% consumption tax.

A consumption tax that would take a higher percentage of the incomes of those with low incomes than those with high incomes. Hence, a regressive tax.

[DuncanK]

Originally posted by David Floyd
Frogger,

The point of taxes is not to punish wealth acquisition, but to fund government, correct? Therefore, what do you care who ends up with more disposable income?

It's the economy stupid.

He's trying to tell you that it's the lower income groups who spend more of their money. If you tax them you are going to cut comsumption and its 2/3rds of the economy.

[David Floyd]

So, low-income groups pay essentially what they would under a flat-tax ssytem (since income equals consumer expenditure) but high-income groups pay less

If one person earns 1 million dollars, and pays a 23% tax, that's $230,000. If another person earns $10,000, 23% is $2300. Explain to me again how the rich person is paying less than the poor person?

Now if you want to argue that taxes are primarily designed for wealth redistribution and punishing wealth acquisition, fine, make that argument and we can talk about that. But if you don't agree with that statement, then, again, what do you care how much money people have left after paying an equal percentage?

[KrazyHorse]

You're spinning your wheels, David.

Progressive taxation: taxation in which higher income earners pay more of their earnings in taxes as a percentage than lower income earners

Proportional taxation: taxation in which all income levels pay the same percentage of their income in taxes

Regressive taxation: taxation in which the higher income levels pay proportionally less of their income in taxes than lower income levels

The classic example of progressive taxation is the income tax in force in most Western countries. The classic example of regressive taxation is the sales tax.