Tax Reform Thread

[KrazyHorse]

Why is it "outrageous" to pay high sales taxes, but not high income taxes?

I'd prefer a high sales tax. At least I have some control over how much I end up paying in sales tax.

Makes no sense

I feel like a high sales tax would be harder to enforce than a high income tax, but I don't actually know if that's the case.

Easier enforcement is one reason a VAT is superior to a sales tax.[/QUOTE]

This is true, but except for when I'm talking about enforcement I use the terms interchangeably.

[Drake Tungsten]

Makes no sense

Depends on the time period we're looking at, doesn't it? I can't lessen the tax I pay over the long-term (assuming I don't want to be buried in my full money bin), but in the short-term I can choose to consume less to avoid paying more tax. With an income tax, I don't have the option to make inter-temporal shifts in my tax payments.

This is true, but except for when I'm talking about enforcement I use the terms interchangeably.

I know you know the difference. I was just explaining things to gribbler.

[KrazyHorse]

Drake, unless you have a view on the likely movement in tax rates it doesn't matter whether you pay the tax now or later

[Drake Tungsten]

Drake, unless you have a view on the likely movement in tax rates it doesn't matter whether you pay the tax now or later

I agree, over the long-term. I would get some psychological utility from having some measure of control over my tax payments in the short term, however. I would prefer to pay more taxes at a time in my life when I feel financially secure enough to also engage in more consumption, rather than just paying a set amount based on my income.

[KrazyHorse]

Again, makes no sense.

[Kuciwalker]

That doesn't really make sense.

xpost, ****er

[KrazyHorse]

Unless you are assuming tax will exempt food or rent

[Drake Tungsten]

I didn't say I could escape paying a sales tax, just that I have some measure of control over it. I have almost no control over how much income tax I pay, unless I get married and pop out a couple little tax credits.

edit: I can't tell if I'm being a ****** and just don't see it, or if you're being pedantic. The fact that Kuci chimed in makes me think it's the latter.

[KrazyHorse]

Drake, a truly universal VAT will force you to pay X% of your lifetime consumption. There is no possible advantage to delaying when you pay it as some sort of insurance policy. That's the beauty; it removes all intertemporal distortions (same as a flat earned income tax).

[Drake Tungsten]

Drake, a truly universal VAT will force you to pay X% of your lifetime consumption.

Yes. I know.

There is no possible advantage to delaying when you pay it as some sort of insurance policy.

There's no advantage, I agree, but I personally would get some utility out of it. Given a choice, I would prefer to pay less in taxes while I'm forgoing consumption in favor of savings to build up wealth and to pay more in taxes when I feel wealthy enough to consume more.

[giblets]

Would replacing income tax with sales tax help people who are in debt? Debt payments wouldn't be taxed, so people could devote a larger percentage of their income to paying down debts, right? Although I guess with the sales tax, people would need a bigger loan to buy the same thing.

[KrazyHorse]

I have no idea why you would feel that way unless you're admitting to nominal currency fetishism.

Under all possible saving/consumption choices the flat earned income tax and flat consumption tax have the exact same effects on your real after-tax consumption.

[KrazyHorse]

dp

[Drake Tungsten]

OK, you're just being pedantic.

On the bright side, this has given me an excuse to learn more about what behavioral economics has to say about the wealth elasticity of demand.

[KrazyHorse]

No, I'm not. You appear to be saying that you'd rather have saved 1 million dollars in a world where there's a 25% consumption tax than 800k in a world where there's no consumption tax.

This seems very odd to me.