NationStates Jolt Archive

I just finished reading (re-reading, actually) The Affluent Society by John Kenneth Galbraith. Galbraith is an excellent writer, and fifty years his attack on the conventional wisdom (a phrase he popularized) still seems applicable. I recommend it.
What interested me the most after this reading, though, was Galbraith's proposal for a larger sales tax. His reasoning is the "social balance" between private and public spending is out of wack, and the sales tax is the most direct way to address this. It seems a sensible case, but there is still the problem of a sales tax being by definition regressive. The poor will pay a higher rate than the rich for the same goods.
What do people here think? Is a consumption tax good for the reason given by Galbraith? For another reason? Not at all? Discuss.

EDIT: In case there's confusion, my title is asking whether the sales tax is preferable to the income tax. I don't know anyone who believes any sort of tax is better than making money.

I like the idea of a sales tax. It will never happen though.

I like the idea of a sales tax. It will never happen though.
What are your reasons for liking it?

I like that I only pay in proportion to what I buy, but I don't like that it's regressive. Maybe if it scaled with more expensive purchases, but I have a nagging feeling I just said something very stupid.

What are your reasons for liking it?

It is not a disincentive to invest.
The more you buy the more you pay in Taxes.

I like that I only pay in proportion to what I buy, but I don't like that it's regressive. Maybe if it scaled with more expensive purchases, but I have a nagging feeling I just said something very stupid.
I was thinking something similar, if I understand you correctly. Things like bread nearly everyone buys, while things like diamonds fewer people buy. It would make sense to have a higher tax on diamonds than bread.
That's still not exactly progressive, but appeals to my sense of fairness, for some reason.

Sales tax is incredibly regressive. People who earn less have to spend more of their income on necessities (food, clothes et c) or even general items (gifts, alcohol et c) than the rich. No matter how much you earn, there is only so much "stuff" you can buy in a year. So the poor end up paying a disproportionately large amount of their income towards these sales taxes and the rich get richer to the detriment of everyone else.

edit: though more regressive than general sales taxes are "sin" taxes. Recently they increased the tax on alcohol. This is about as regressive a tax as you can get.

I just finished reading (re-reading, actually) The Affluent Society by John Kenneth Galbraith. Galbraith is an excellent writer, and fifty years his attack on the conventional wisdom (a phrase he popularized) still seems applicable. I recommend it.
What interested me the most after this reading, though, was Galbraith's proposal for a larger sales tax. His reasoning is the "social balance" between private and public spending is out of wack, and the sales tax is the most direct way to address this. It seems a sensible case, but there is still the problem of a sales tax being by definition regressive. The poor will pay a higher rate than the rich for the same goods.
What do people here think? Is a consumption tax good for the reason given by Galbraith? For another reason? Not at all? Discuss.

EDIT: In case there's confusion, my title is asking whether the sales tax is preferable to the income tax. I don't know anyone who believes any sort of tax is better than making money.

It's fairly easy to control how much sales tax the poor pay by controlling the tax rate on various goods. For example, sales tax on food can be zero while clothes, gas, electricity and other expenses can be tax exempt up to a certain amount. Taxes on goods can even be progressive as the price of the particular product goes up; a $20,000 car can be taxed at a lower rate than a $40,000 car.

The problem with this is that it encourages saving money and the last thing the extremely rich want is everybody else saving money because it'll be harder for them to get it. :tongue:

I do not think sales tax is better than income tax, because it disproportionately targets the poor, who cannot afford to save or invest money. It makes no rational sense to me to make the poor pay a larger percentage of their income in taxes than the rich.

I was thinking something similar, if I understand you correctly. Things like bread nearly everyone buys, while things like diamonds fewer people buy. It would make sense to have a higher tax on diamonds than bread.
That's still not exactly progressive, but appeals to my sense of fairness, for some reason.

That's what I was getting at. But I imagine there's a good reason why it isn't done. Perhaps it makes things like houses and cars even less accessible to those who are less fortunate? I'm not sure really, I'm just thinking out loud.

It's fairly easy to control how much sales tax the poor pay by controlling the tax rate on various goods. For example, sales tax on food can be zero while clothes, gas, electricity and other expenses can be tax exempt up to a certain amount. Taxes on goods can even be progressive as the price of the particular product goes up; a $20,000 car can be taxed at a lower rate than a $40,000 car.

The problem with this is that it encourages saving money and the last thing the extremely rich want is everybody else saving money because it'll be harder for them to get it. :tongue:

See sales tax would be extremely progressive.

That's what I was getting at. But I imagine there's a good reason why it isn't done. Perhaps it makes things like houses and cars even less accessible to those who are less fortunate? I'm not sure really, I'm just thinking out loud.

not really as they would pay less taxes. It might make the poor wait for a few years and save money.

I prefer income taxes, I don't have to worry about calculating theme every time I go to the store, and like Poli and some others said, you are taxing the poor more than you are the wealthy, its inproportionate and not fair.

Sales tax, with possible exceptions for food.

By the way, I'm neither for nor against it other than a mild tendency to be against any major overhaul in anything the government does because somehow, the same powerful people manage to twist any plan to favor them. However, I could be convinced that a sales tax instead of income tax would be just as fair(or unfair).

The problem with this is that it encourages saving money and the last thing the extremely rich want is everybody else saving money because it'll be harder for them to get it. :tongue:

This is exactly why it won't be put into place. It's only ok if corporations hoard money. If consumer spending drops then everything is screwed up. Just listen to the news broadcasts. They never mention corporations hoarding cash only about how consumer spending is down. The Man is very devious.

I do not think sales tax is better than income tax, because it disproportionately targets the poor, who cannot afford to save or invest money. It makes no rational sense to me to make the poor pay a larger percentage of their income in taxes than the rich.
The second part of Galbraith's argument, the more conventional liberal part, was that government spending for welfare, education and the like would increase. Thus, while a low-income earner may not be able to afford a car, they would be able to get a better education, or better public housing. In fact, taxes could be tied directly to appropriate public spending: the gasoline tax would pay for clean energy research, the cigarette tax would help fund part of the public health service, a tax on television would pay for schools. If the increased revenue really went to benefiting the poor, I think it would be worth the extra money they would spend.

The second part of Galbraith's argument, the more conventional liberal part, was that government spending for welfare, education and the like would increase. Thus, while a low-income earner may not be able to afford a car, they would be able to get a better education, or better public housing. In fact, taxes could be tied directly to appropriate public spending: the gasoline tax would pay for clean energy research, the cigarette tax would help fund part of the public health service, a tax on television would pay for schools. If the increased revenue really went to benefiting the poor, I think it would be worth the extra money they would spend.

But doesn't that lead right to the socialist bogeyman that everyone seems to want to avoid?

But doesn't that lead right to the socialist bogeyman that everyone seems to want to avoid?
Yes. Well, actually, not necessarily. I think a state government could raise sales tax and link it directly to funding without necessarily creating new programs. Talk radio to the contrary, most Americans do want more spending for things like education, scientific investment, and public safety. They just don't want tax hikes to accompany this increase. A sales tax would solve half of that problem. ;)

EDIT: Just to satisfy my curiosity, has anyone else read anything by Galbraith?

The problem with sales tax is that you end up tied to a boom and bust cycle. Look at Nevada, which has one of the largest holes to plug and, thanks to the idiot currently residing in Carson City, is looking at things like a 50% cut to higher education. When the economy is good, yes, people spend and you get a lot of sales taxes. When it's bad though... Then not nearly so much so you end up with rather large budget holes.

The only way to stop such wild swings would be to tax basic nessesities, such as food, and then you would end up taxing the poor more than the rich.

It's fairly easy to control how much sales tax the poor pay by controlling the tax rate on various goods. For example, sales tax on food can be zero while clothes, gas, electricity and other expenses can be tax exempt up to a certain amount. Taxes on goods can even be progressive as the price of the particular product goes up; a $20,000 car can be taxed at a lower rate than a $40,000 car.


Keep in mind that some shops use a lot of a certain type of resource even though they may be a one-person establishment with only average income -- for example, a washer & dryer repairman'll use a lot of gas driving to the houses he services. That's why we should stick with a progressive income tax, which does what we want and is more direct.

Keep in mind that some shops use a lot of a certain type of resource even though they may be a one-person establishment with only average income -- for example, a washer & dryer repairman'll use a lot of gas driving to the houses he services. That's why we should stick with a progressive income tax, which does what we want and is more direct.
That's a good point. I suppose the repairman could list the tax as a business deduction when filing his income tax, but I can't think of a reasonable way to get around that problem directly.

I like the income tax better, but if the government wants to fund something, they should make it tax deductible. Like health insurance.

Also, I don't think that a sales tax disenfranchises the poor, even is it is regressive, as long as it doesn't tax food or medicine. I think a flat sales tax would theoretically reduce trade with foreign nations as the cost of stuff goes up. I am not in favor of tariffs or import taxes of any kind.

Consumption taxes are nice because they discourage overconsumption, and overconsumption is bad.

Income taxes are nice because they can easily be made progressive.

Solution: Sales taxes are nice if matched with an extremely progressive income tax.

Consumption taxes are nice because they discourage overconsumption, and overconsumption is bad.

Income taxes are nice because they can easily be made progressive.

Solution: Sales taxes are nice if matched with an extremely progressive income tax.

I'd agree with that. In addition to discouraging overconsumption, consumption taxes also encourage the opposite, saving. I think that would be helpful to many people.

Having lived under Sales Tax regimes (Washington State and the current Australian GST) I can say clearly that such taxes put the primary burden of funding the state on those least able to carry it.

The wealthy do not care about Sales Taxes, because they amount to a tiny percentage of their income. The poor wind up paying far more of their money, percentagewise, and become more restricted in their other purchases - which incidentally means they largely cease to be consumers, with predictable bad effects on the economy.

A fairly set progressive income tax is the fairest and best form of tax for all involved. It removes the burden from the poor without being punitive on the rich and provides sufficient monies for any reasonable level of government.

The wealthy do not care about Sales Taxes, because they amount to a tiny percentage of their income. The poor wind up paying far more of their money, percentagewise, and become more restricted in their other purchases - which incidentally means they largely cease to be consumers, with predictable bad effects on the economy.

Replacing income tax with sales tax seems unwise. But imagine if the state government provided much more services, health care, for instance. Would the benefits brought to the poor (and everyone else, indirectly) not be worth the overall decrease in consumer spending?
(I'm speaking of hypothetical taxes, of course. I'm not so cocky as to question you when you said the sales taxes you experienced were unsuccessful.)

I just finished reading (re-reading, actually) The Affluent Society by John Kenneth Galbraith. Galbraith is an excellent writer, and fifty years his attack on the conventional wisdom (a phrase he popularized) still seems applicable. I recommend it.
What interested me the most after this reading, though, was Galbraith's proposal for a larger sales tax. His reasoning is the "social balance" between private and public spending is out of wack, and the sales tax is the most direct way to address this. It seems a sensible case, but there is still the problem of a sales tax being by definition regressive. The poor will pay a higher rate than the rich for the same goods.
What do people here think? Is a consumption tax good for the reason given by Galbraith? For another reason? Not at all? Discuss.

EDIT: In case there's confusion, my title is asking whether the sales tax is preferable to the income tax. I don't know anyone who believes any sort of tax is better than making money.

I think a balance between sales tax and income tax is best.
If you go only for income tax, people easily get the feeling they're paying too much.
If you only go for sales tax, you can seriously hurt some businesses, as well as ruin your tourist industry.

of course tax is better then money, you kan pin things on walls with them.

Replacing income tax with sales tax seems unwise. But imagine if the state government provided much more services, health care, for instance. Would the benefits brought to the poor (and everyone else, indirectly) not be worth the overall decrease in consumer spending?
(I'm speaking of hypothetical taxes, of course. I'm not so cocky as to question you when you said the sales taxes you experienced were unsuccessful.)

No, I don't think so. You'd be expanding the wealth spent while reducing the wealth made by consumer spending. While in such a scenario the poor would likely not be seriously worse off, overall wealth creation in the system would decrease - I cannot consider that a good outcome.
(And I much appreciate your post-script).

It's fairly easy to control how much sales tax the poor pay by controlling the tax rate on various goods. For example, sales tax on food can be zero while clothes, gas, electricity and other expenses can be tax exempt up to a certain amount. Taxes on goods can even be progressive as the price of the particular product goes up; a $20,000 car can be taxed at a lower rate than a $40,000 car.


Here in Italy we have both income (IRPEF) and sales (IVA = VAT) taxes.

The IRPEF is progressive (4 echelons iirc). There are different IVA rates for different classes of items: example, most things are at 20%, but food is at 4%.

I think that the sales tax can be an interesting tool to fight against tax evasion. If people could subtract from their yearly income the amount they already payed on sales taxes, by presenting receipts, shop owners and professionals could not evade taxes anymore (salary workers cannot evade taxes as the taxes are already subtracted from the monthly wage).
It has been reckoned by the Ministry of Economy that if everybody in Italy paid fully the taxes he's due, we could lower taxes by about one third, or repay our debt in a single year.

I like the income tax better, but if the government wants to fund something, they should make it tax deductible. Like health insurance.

Also, I don't think that a sales tax disenfranchises the poor, even is it is regressive, as long as it doesn't tax food or medicine. I think a flat sales tax would theoretically reduce trade with foreign nations as the cost of stuff goes up. I am not in favor of tariffs or import taxes of any kind.

To "disenfranchise" is to deny the vote to (or more vaguely, to diminish the representation in government to) a population. You seem to mean it in the sense "to disadvantage economically" or ... something.

I neither agree nor disagree with your post as a whole. I don't understand it.

To "disenfranchise" is to deny the vote to (or more vaguely, to diminish the representation in government to) a population. You seem to mean it in the sense "to disadvantage economically" or ... something.

I neither agree nor disagree with your post as a whole. I don't understand it.

Excuse me, I was not sober when I posted that.:$

I'm not really sure what I meant either.

The second part of Galbraith's argument, the more conventional liberal part, was that government spending for welfare, education and the like would increase. Thus, while a low-income earner may not be able to afford a car, they would be able to get a better education, or better public housing. In fact, taxes could be tied directly to appropriate public spending: the gasoline tax would pay for clean energy research, the cigarette tax would help fund part of the public health service, a tax on television would pay for schools. If the increased revenue really went to benefiting the poor, I think it would be worth the extra money they would spend.

I don't really understand that argument, why raise taxes disproportionately on the poor to provide services for the poor? I think sales taxes actually discourage social spending, primarily because they do such a poor job of redistributing wealth.

My home state has a sales tax, so I don't understand all this about "a sales tax will never be implemented".

Perhaps we could make specific items (namely food) exempt from sales tax. Though that would impair consumer spending big-time.

Income tax disproportionately affects the rich.
Sales tax disproportionately affect the poor.
Property taxes disproportionately affect the middle class.

We have all three. Fair's fair.

Income tax disproportionately affects the rich.
Sales tax disproportionately affect the poor.
Property taxes disproportionately affect the middle class.

We have all three. Fair's fair.

Except, y'know, there's a huge difference between "I lost one of my dozen homes to pay the taxes." and "I lost ONLY home to pay the taxes."

I believe in a sales tax, variable by kind of good. Luxury goods get higher rates of tax, whilst staples get lower (or no) sales taxes.

And yes, I beleive that it should be used to replace (at least partially) income tax, rather than financing a blowout in government spending.

I don't really understand that argument, why raise taxes disproportionately on the poor to provide services for the poor? I think sales taxes actually discourage social spending, primarily because they do such a poor job of redistributing wealth.
The idea is that the public spending benefits the poor and the nation as a whole indirectly by fixing the balance between public and private spending. The poor and everyone else spend a lot on stuff they don't really need (think "conspicuous consumption"), which is okay, but not when it is at the expense of the services the government provides such as education, health, etc. A sales tax would raise public spending and reduce private.
That's basically Galbraith's argument, basically that yes, this will reduce the spending of the poor, but they really shouldn't be spending so much anyway. I agree with his sentiments, the problem is of course deciding what is conspicuous consumption and what is just raising the standard of living. You may actually be interested in reading some of his writing; he is in the same school of thought as Veblen.

My home state has a sales tax, so I don't understand all this about "a sales tax will never be implemented".

Perhaps we could make specific items (namely food) exempt from sales tax. Though that would impair consumer spending big-time.
Virginia does, too, but it's low compared to most income tax. I think people are saying a national sales tax will never be implemented. (I don't even know if that's true, though. I don't think one exists, but I'm not sure how tariffs are counted.)

Virginia does, too, but it's low compared to most income tax. I think people are saying a national sales tax will never be implemented. (I don't even know if that's true, though. I don't think one exists, but I'm not sure how tariffs are counted.)
Which is the other problem of course, a lot of states do have sales taxes (Sometimes local governments add on as well) and use them as a major source of income. Nevada's rate is around and about 7%, adding in a federal sales tax would quite likely push the rate of sales taxes in the US over 10%.

It's fairly easy to control how much sales tax the poor pay by controlling the tax rate on various goods. For example, sales tax on food can be zero while clothes, gas, electricity and other expenses can be tax exempt up to a certain amount. Taxes on goods can even be progressive as the price of the particular product goes up; a $20,000 car can be taxed at a lower rate than a $40,000 car.

The problem with this is that it encourages saving money and the last thing the extremely rich want is everybody else saving money because it'll be harder for them to get it. :tongue:

Don't count on the poor right-wing supporters going for that. Alabama just killed a repeal of the grocery tax because they planned to make the money up in increasing the tax on people making hundreds of thousands of dollars a year (a massive amount of money in Alabama) by 3%.

It is not a disincentive to invest.
The more you buy the more you pay in Taxes.

If there were to be such a system, all purchases should be taxed. That includes purchases on stocks, bonds, mutual funds and other investments.

If there were to be such a system, all purchases should be taxed. That includes purchases on stocks, bonds, mutual funds and other investments.

Capital gains already arn't taxed enough.

Capital gains already arn't taxed enough.

Yeah, I've never understood why. There's nothing wrong with making money from capital gains, but why are they taxed at a lower rate than other income, why not just add them to the total income tax liability? Is it supposed to be an incentive to invest?

It's fairly easy to control how much sales tax the poor pay by controlling the tax rate on various goods. For example, sales tax on food can be zero while clothes, gas, electricity and other expenses can be tax exempt up to a certain amount. Taxes on goods can even be progressive as the price of the particular product goes up; a $20,000 car can be taxed at a lower rate than a $40,000 car.

The problem with this is that it encourages saving money and the last thing the extremely rich want is everybody else saving money because it'll be harder for them to get it. :tongue:

You don't get a good idea of how things work by thinking about how well they can be implemented. You have to think of how they can go horribly wrong.

Like how making sex offenders register when they move to a neighborhood will protect the kids. It won't destroy property values or be used against teenagers who have sex with each other or send each other racy pictures on their cell phones, right?

Banning alcohol will reduce the crime rate to the point that most towns will be able to sell their jails, right?

In reality, the rich will lobby to have luxury goods taxed at lower rates than staples arguing that the more of something that gets purchased the more money that will be made from it, and no matter how high the tax on diamonds, so few diamonds are purchased that it will be a pittance in the Federal Coffers. A 10% tax on eggs will be more money than even a 1,000% tax on diamonds.

The poor, who can barely afford staples will not be able to afford lobbyists to push for lower sales taxes on basic necessities.

You don't get a good idea of how things work by thinking about how well they can be implemented. You have to think of how they can go horribly wrong.

That is true, but a fair sales tax itself couldn't really go horribly wrong. Once it's in place, it's in place until a new law comes along. The two examples you gave show what can occur even if the law is carried out exactly the way its written. The only way for the rich to lobby for a lower rate would be to create a new law.

Yeah, I've never understood why. There's nothing wrong with making money from capital gains, but why are they taxed at a lower rate than other income, why not just add them to the total income tax liability? Is it supposed to be an incentive to invest?

There isn't a single rate. Sometimes they are taxed at the same rate as other income. Sometimes they are higher. A lot depends upon the individual making the sale, what is being sold, and how long it's been held.

You can't really make a sweeping statement about cap gains because there are so many different situations.

There isn't a single rate. Sometimes they are taxed at the same rate as other income. Sometimes they are higher. A lot depends upon the individual making the sale, what is being sold, and how long it's been held.

You can't really make a sweeping statement about cap gains because there are so many different situations.
I know for most short-term gains, it's just like regular income, but different with longer. I'm still generalizing, but why is time of holding a contributing factor? Is it so people don't have their nest eggs or savings taxed as heavily as other income?

not really as they would pay less taxes. It might make the poor wait for a few years and save money.

Which part of 'poor' confused you?

I like that I only pay in proportion to what I buy,

How is that better than paying tax on what you earn?

How is that better than paying tax on what you earn?

You don't have to spend everything you earn. One of the appeals of a consumption tax is that it doesn't tax saving.

You don't have to spend everything you earn. One of the appeals of a consumption tax is that it doesn't tax saving.

Which means, those who can afford to save get a taxbreak, effectively.

I don't see how that's better than being taxed on what you earn. It shifts the burden more towards the poor end of the spectrum, and leaves the extremely wealthy able to exploit the system to favor them. It is effectively, a tax on the lower and middle-classes.

I know for most short-term gains, it's just like regular income, but different with longer. I'm still generalizing, but why is time of holding a contributing factor? Is it so people don't have their nest eggs or savings taxed as heavily as other income?

I think it is to encourage people to buy and hold for the longer term. I'm not sure if there is any well thought out reason for the different treatment though.

Arguably it does cause problems with prices.

The idea is that the public spending benefits the poor and the nation as a whole indirectly by fixing the balance between public and private spending. The poor and everyone else spend a lot on stuff they don't really need (think "conspicuous consumption"), which is okay, but not when it is at the expense of the services the government provides such as education, health, etc. A sales tax would raise public spending and reduce private.


There's a certain logic to that, although I think it overlooks a profound political problem. Under an income tax regime, you can pay for new public spending by raising taxes only on higher income brackets and secure widespread support for it. Under the sales tax regime you don't have that option, all consumers will be squeezed by new public spending initiatives, and it's the lower (and numerically dominant) income brackets who will be squeezed proportionally the most. Whether or not you or I or any legislator thinks that public spending is more justified than private conspicuous consumption, any attempts to impose it will be met with a stiffer and more universal opposition than under income tax regimes. I really don't think it's an accident that the modern welfare state came about after income taxes were first implemented.


That's basically Galbraith's argument, basically that yes, this will reduce the spending of the poor, but they really shouldn't be spending so much anyway. I agree with his sentiments, the problem is of course deciding what is conspicuous consumption and what is just raising the standard of living. You may actually be interested in reading some of his writing; he is in the same school of thought as Veblen.

Thanks for the recommendation; I'm actually trying to track down Amartya Sen these days, but I'll keep my eye out for Galbraith, too.

Which part of 'poor' confused you?

If they are unable to afford to save, then how are they ale to afford a house or car payment?

Which means, those who can afford to save get a taxbreak, effectively.

I don't see how that's better than being taxed on what you earn. It shifts the burden more towards the poor end of the spectrum, and leaves the extremely wealthy able to exploit the system to favor them. It is effectively, a tax on the lower and middle-classes.
True, which is why I don't recommend dumping income tax any time soon (or instating a national sales tax anytime soon, for that matter). But even among the lower class of the United States, so much of what is spent is unnecessary. It may limit what people can buy, perhaps to the point where it's not worth putting it in place, but to steal an example from the book, a tax on salt today would not have nearly the same effect on livelihood as it did in 1780s France. The poorest of the poor cannot afford basic necessities anyway, and would hopefully be on welfare anyway.

EDIT: Most of my arguments are based on my understanding of Galbraith's arguments. I'm not sure I don't prefer income taxes, or even completely buy his argument. But it was interesting to hear an appeal for consumption tax from a liberal, which is why I brought it up here.

True, which is why I don't recommend dumping income tax any time soon (or instating a national sales tax anytime soon, for that matter). But even among the lower class of the United States, so much of what is spent is unnecessary. It may limit what people can buy, perhaps to the point where it's not worth putting it in place, but to steal an example from the book, a tax on salt today would not have nearly the same effect on livelihood as it did in 1780s France. The poorest of the poor cannot afford basic necessities anyway, and would hopefully be on welfare anyway.

EDIT: Most of my arguments are based on my understanding of Galbraith's arguments. I'm not sure I don't prefer income taxes, or even completely buy his argument. But it was interesting to hear an appeal for consumption tax from a liberal, which is why I brought it up here.

It is an interesting idea, and one that a lot of people pick up, examine... and then put down again, because it looks WAY too unwieldy, and ultimately destructive.

It sounds like a good idea at first blush - you get to 'keep the fruits of your labor', and you only pay tax in proportion to electives... but that's where the fundamental flaw is, also - the richer you are, the more 'elective'... well, everything becomes.

Worse still, once you start talking 'real money' (i.e. in the multiple thousands of dollars), taxes on purchases become completely nonsensical, because the rich literally CAN opt out of them completely. (By 'offshoring').

Income tax is federal (mostly) and sales tax is local. Apples / Oranges.

I say leave the tax code alone, decentralize, and slash federal spending.

In 1994 the US government shut down all "non-essential" services for a few weeks during the 'government shutdown" over a budget dispute. Nobody ever asked the important question; "Why do we even have non-essential services?" I say shut them down again and leave it that way. If anyone complains then they can lobby their local government to provide the service.

Fewer people will care about tax policy if tax rates were cut to more reasonable levels and decision making was more local.

In reality, the rich will lobby to have luxury goods taxed at lower rates than staples
And your rational is because they have been so effective at getting luxury income taxed at a rate lower than everyone else...?

Income tax is federal (mostly) and sales tax is local. Apples / Oranges.

I say leave the tax code alone, decentralize, and slash federal spending.

In 1994 the US government shut down all "non-essential" services for a few weeks during the 'government shutdown" over a budget dispute. Nobody ever asked the important question; "Why do we even have non-essential services?" I say shut them down again and leave it that way. If anyone complains then they can lobby their local government to provide the service.

Fewer people will care about tax policy if tax rates were cut to more reasonable levels and decision making was more local.


And your rational is because they have been so effective at getting luxury income taxed at a rate lower than everyone else...?

Define "non-essential service."

Define "non-essential service."

It's easier to define essential, when you think about how big the government is. Surprisingly, Members of Congress made the list (http://www.rules.house.gov/archives/98-844.pdf).


An immediate and critical shutdown effect is the
furloughing (placing in a temporary, non-duty, non-pay status) of federal employees.
Exempted from furloughs are presidential appointees, Members of Congress, uniformed
military personnel, and federal employees rated “essential.” “Essential” employees,
required to work during a shutdown, are those performing duties vital to national defense,
public health and safety, or other crucial operations. Shutdown furloughs are not
considered a break in service and are generally creditable for retaining benefits and
seniority. Also, federal employees who have been affected by the shutdown have received
their salaries retroactively.

Also, it appears that a government shutdown, under the present rules, only accumulates debt. Salaries all get paid retroactively. I guess you can't just send a Federal worker home without pay. What a racket!

Anyway, I say just fire the rest -- the ones that aren't essential. What are they doing in federal service anyway?

Income tax is federal (mostly) and sales tax is local. Apples / Oranges.

I say leave the tax code alone, decentralize, and slash federal spending.

In 1994 the US government shut down all "non-essential" services for a few weeks during the 'government shutdown" over a budget dispute. Nobody ever asked the important question; "Why do we even have non-essential services?" I say shut them down again and leave it that way. If anyone complains then they can lobby their local government to provide the service.

Fewer people will care about tax policy if tax rates were cut to more reasonable levels and decision making was more local.


No, people would still gripe about how they were 'slaves' if the tax was a penny in the dollar.

There's a certain logic to that, although I think it overlooks a profound political problem. Under an income tax regime, you can pay for new public spending by raising taxes only on higher income brackets and secure widespread support for it. Under the sales tax regime you don't have that option, all consumers will be squeezed by new public spending initiatives, and it's the lower (and numerically dominant) income brackets who will be squeezed proportionally the most. Whether or not you or I or any legislator thinks that public spending is more justified than private conspicuous consumption, any attempts to impose it will be met with a stiffer and more universal opposition than under income tax regimes. I really don't think it's an accident that the modern welfare state came about after income taxes were first implemented.

Actually in contemporary nation-states those with the largest welfare states are financed more by consumption taxes rather than by income taxes.

In 1994 the US government shut down all "non-essential" services for a few weeks during the 'government shutdown" over a budget dispute. Nobody ever asked the important question; "Why do we even have non-essential services?"


"Non-essential" services seem to be those services that won't have large negative effects, including death, if they aren't available for a short period of time.

Also, it appears that a government shutdown, under the present rules, only accumulates debt. Salaries all get paid retroactively. I guess you can't just send a Federal worker home without pay. What a racket!

I think this might be because of contract law. If an employer hires someone and they, the employee, are willing and able to work but can't, because of something the employer did, then they are still owed compensation even if they didn't do any work.

That is true, but a fair sales tax itself couldn't really go horribly wrong. Once it's in place, it's in place until a new law comes along. The two examples you gave show what can occur even if the law is carried out exactly the way its written. The only way for the rich to lobby for a lower rate would be to create a new law.

You're still clinging to the idea that a law once in place will remain pure. It won't. It may get passed initially as a "fair sales tax," but then the small modifications will come in successive election cycles. And they will pass easily because each of them is so innocuous. But what it will add up to is big taxes on things poor people buy and little to no taxes on things that rich people buy.

You don't have to spend everything you earn. One of the appeals of a consumption tax is that it doesn't tax saving.

You mean like a 401k?

It's easier to define essential, when you think about how big the government is. Surprisingly, Members of Congress made the list (http://www.rules.house.gov/archives/98-844.pdf).


An immediate and critical shutdown effect is the
furloughing (placing in a temporary, non-duty, non-pay status) of federal employees.
Exempted from furloughs are presidential appointees, Members of Congress, uniformed
military personnel, and federal employees rated “essential.” “Essential” employees,
required to work during a shutdown, are those performing duties vital to national defense,
public health and safety, or other crucial operations. Shutdown furloughs are not
considered a break in service and are generally creditable for retaining benefits and
seniority. Also, federal employees who have been affected by the shutdown have received
their salaries retroactively.

Also, it appears that a government shutdown, under the present rules, only accumulates debt. Salaries all get paid retroactively. I guess you can't just send a Federal worker home without pay. What a racket!

Anyway, I say just fire the rest -- the ones that aren't essential. What are they doing in federal service anyway?

Hardly a racket. The skills required for most Federal jobs would be very lucrative in the private sector. I work for the IRS and could make a lot of money for a few months out of the year if I took some time off work and did taxes. I know all the legal loopholes, and better still, I know the procedural ones. I know how much money you have to claim before the IRS decides it's worth asking you to back it up.

The problem is, it's unreliable. It's a flood of work for a few months of the year, and then you're stuck doing uncompensated work to correct the mistakes cause by people not giving you the correct information the first time.

I make less money working for the government, but I'm guaranteed a paycheck no matter how little work there is to do (I used to be a seasonal employee, so this was not always the case) and as long as I meet expectations I'm guaranteed a promotion. It's a trade off. Compensation for job security.

Go to the private sector start at 50-60k and maybe get promoted and make a lot more, maybe go nowhere and get stuck in a dead-end job while nepotism and cronyism see less qualified people get promoted ahead of you and then hand you your pink-slip when the cutbacks come.

Or,
Go into public service, start at 25-35k. Guaranteed promotions based on performance, not preference, and guaranteed job security regardless of demands for your service and re-training for a job of equal compensation if your position becomes obsolete.

It's not a racket. It's a deal.

I think it is to encourage people to buy and hold for the longer term. I'm not sure if there is any well thought out reason for the different treatment though.

Arguably it does cause problems with prices.

Short term gains are aimed at day traders for whom these "investments" are the equivalent of business income or wages. It's how they earn their living.

Long term investments are savings. Plus putting money into the market and leaving it there encourages market stability, which the government ostensibly wishes to promote.

And your rational is because they have been so effective at getting luxury income taxed at a rate lower than everyone else...?

Yes, they have. By which of course I mean capital gains tax from which the very rich disproportionately get their money. If most tax came from sales then they would shift their lobbying efforts from sch A and C deductions (which would no longer exist) into modifying the sales tax.

Define "non-essential service."

Anything not produced by soaking the whole thing in alcohol for a few weeks until the alcohol is discolored.

Actually in contemporary nation-states those with the largest welfare states are financed more by consumption taxes rather than by income taxes.


Really? Sweden, which is about the best developed welfare state I can think of, gathers more in income tax than they do in consumption tax. Moreover, their increase in consumption tax vs. income tax coincides with the neoliberal turn and the consequent decline of their social spending.

I don't endorse much of the content of this link, (http://www.freedomandprosperity.org/Papers/sweden/sweden.shtml) but if you'll skip down to Figure 1, and read the paragraph above, you'll see what I'm talking about. If you've got other, better, data I'd be interested to see it.