for nye

[Hauldren Collider]

HC, figure out what the subthread is about before responding. Thanks.

By the way, would it be possible to replace every random tax with just a consumption tax (forgetting incentives and stuff)?

Personally, I think that using tax incentives at all is ridiculous because with taxes, the burden of proof is on the defendant, so you lose due process rights if the government were to replace fines with "breaks" (which it has). But that is another topic entirely.

[Kuciwalker]

Sigh. No it's not. But instead of trying to explain option value to you, I'll mention that liquidity and access to credit are other real, theoretically measurable benefits of unspent wealth.

THE POTENTIAL VALUE OF THE WEALTH IS AFFECTED DIRECTLY BY THE TAX BECAUSE ANY POSSIBLE EXERCISE OF THE OPTION WOULD BE TAXED.

Alternatively, if income is taxed, then the WEALTH IS ALREADY DECREASED BY THE PROPORTION OF THE TAX.

[notyoueither]

THE POTENTIAL VALUE OF THE WEALTH IS AFFECTED DIRECTLY BY THE TAX BECAUSE ANY POSSIBLE EXERCISE OF THE OPTION WOULD BE TAXED.

Not if the person leaves, or spends the wealth on tax exempt consumption.

And what about using savings to avoid the weight of the tax? If person A is subsisting and needs to spend all income to live, that person will bear the full weight of the tax. Whereas person B may be able to save a significant portion of income and see significant growth from investment. Person B will not bear the same weight of the tax.

Unless... are you thinking of taxing capital movement and returns from investment?

[Hauldren Collider]

Wait there's a detail here I think I've overlooked and Mint may have touched on it. How does this tax affect taking out loans? If you take out a loan and buy something, is the loaned money you spend taxed? Furthermore, how do you make such a tax system progressive? And finally, is it actually constitutional for the federal government to apply such a tax (using strict interpretation, I don't buy the living document bull****)?

[Kuciwalker]

Not if the person leaves,

As we've already explained, almost the entire developed world already uses consumption taxes, so that's not going to gain you much.

or spends the wealth on tax exempt consumption.

... presumably that consumption was made tax-exempt for a reason, no?

And what about using savings to avoid the weight of the tax? If person A is subsisting and needs to spend all income to live, that person will bear the full weight of the tax. Whereas person B may be able to save a significant portion of income and see significant growth from investment. Person B will not bear the same weight of the tax.

...

Yes, person B will feel the same weight of the tax. Assuming e.g. a flat 20% consumption tax, however B distributes his spending through time he will only be able to buy 83% as much stuff as if there were no tax.

Whereas if you tax capital gains, a person B who saves his money ends up with a smaller proportion of stuff, post-tax, than a person B who spends it all at once.

[Kuciwalker]

Wait there's a detail here I think I've overlooked and Mint may have touched on it. How does this tax affect taking out loans? If you take out a loan and buy something, is the loaned money you spend taxed?

Under a consumption tax, it's "taxed" in the same sense that any loan is affected by sales tax.

Furthermore, how do you make such a tax system progressive?

An EITC and/or fixed annual rebates. Or, if the consumption tax is structured as a tax on earned income minus savings, you can just make it directly progressive.

And finally, is it actually constitutional for the federal government to apply such a tax (using strict interpretation, I don't buy the living document bull****)?

The federal government has virtually unlimited power in the sphere of economic regulation, so yes, it's constitutional.

[Hauldren Collider]

The federal government has virtually unlimited power in the sphere of economic regulation

I understand the amount of jurisprudence on this but I don't agree.

Commerce clause should not be a catch-all

I don't buy the idea that the fact that commerce has macroscopic effects in the rest of the country means that all commerce is interstate.

[Kuciwalker]

Unfortunately for you the rest of us live in the real world.

[Hauldren Collider]

It's unfortunately true at the moment but I don't think it's inconceivable that people someday realize that this means the federal government can do whatever it wants, which is NOT in the constitution.

[Kuciwalker]

I don't think it's inconceivable

Sorry, dude. This is one of those "you're just wrong" moments.

[Solomwi]

HC, your head's going to explode when you see Wickard v. Filburn.

Unfortunately, Kuci's right.

[Hauldren Collider]

I've already seen it. A very unfortunate decision.

[notyoueither]

As we've already explained, almost the entire developed world already uses consumption taxes, so that's not going to gain you much.

We might ask the Brits about the effect of having tax rates out of whack with jurisdictions that are easy to move to and attractive places to live.

I think your proposed 20% consumption tax (if a VAT) would be in excess of double that in some (or many) other jurisdictions. In short, it is a recipe for KH's 'tax arbitrage.'

... presumably that consumption was made tax-exempt for a reason, no?.

In Canada residential real estate was made tax exempt, for obvious reasons. However, that exemption was in the context of significant personal income taxation so that the well off would not skate on tax burden when purchasing their homes.

Your ideal society sounds like a great place to amass wealth, not sure if you'd need the real estate bubble though, or the economic inequality. The prols do get uppity when slapped in the face too much.

And what about using savings to avoid the weight of the tax? If person A is subsisting and needs to spend all income to live, that person will bear the full weight of the tax. Whereas person B may be able to save a significant portion of income and see significant growth from investment. Person B will not bear the same weight of the tax.

...

Yes, person B will feel the same weight of the tax. Assuming e.g. a flat 20% consumption tax, however B distributes his spending through time he will only be able to buy 83% as much stuff as if there were no tax.

Whereas if you tax capital gains, a person B who saves his money ends up with a smaller proportion of stuff, post-tax, than a person B who spends it all at once.

From what do you derive the figure of 83%? I would think the number would change with the period of savings, return on investment, inflation, etc.

Perhaps for us slower readers you could lay out the groundwork, like what personal tax rate, capital gains rate, corporate rate, VAT or other 'equivalent' consumption tax?

[Kuciwalker]

We might ask the Brits about the effect of having tax rates out of whack with jurisdictions that are easy to move to and attractive places to live.

I think your proposed 20% consumption tax (if a VAT) would be in excess of double that in some (or many) other jurisdictions. In short, it is a recipe for KH's 'tax arbitrage.'

I wasn't proposing any percent tax. I was using a completely arbitrary number to demo the math.

In Canada residential real estate was made tax exempt, for obvious reasons. However, that exemption was in the context of significant personal income taxation so that the well off would not skate on tax burden when purchasing their homes.

Your ideal society sounds like a great place to amass wealth, not sure if you'd need the real estate bubble though, or the economic inequality. The prols do get uppity when slapped in the face too much.

I don't even understand what the point here is.

From what do you derive the figure of 83%? I would think the number would change with the period of savings, return on investment, inflation, etc.

1/1.2 = .83333333

And no, it doesn't change.

[Drake Tungsten]

I think your proposed 20% consumption tax (if a VAT) would be in excess of double that in some (or many) other jurisdictions.

You would really benefit by doing some basic research before you post. This is wrong, of course, but I'll leave it up to you to find the evidence. You could use the practice.