[lsaferite]

As much as the minuscule corp tax bills infuriate me, my logical half laughs and says income tax is silly, just use sales tax.

I know we'll never pass something along the lines of FairTax, but I daydream about it all the time. And yes, I've heard all the arguments against it and I still think it's a much better solution than taxing income.

[tobltobs]

A sale tax only system would be a nice gift for the wealthy.

[lsaferite]

I did say something along the lines of FairTax. They proposed a yearly 'prebate' check of the taxes paid on base level spending. That is to combat the regressive tax situation.

[plouc]

Could you develop? I am genuinely curious.

[PeterisP]

If you're paid $100 in cash as wages and use it to buy food and pay rent, then your effective tax rate is equal to the sales tax rate.

If you or your company is earning $1m in profit, and use half of that for spending and buying goods (that are taxed by sales tax) and the other half to buy revenue-producing assets - shares of other companies, real estate, bonds - then half of your income isn't taxed at all, your effective tax rate is twice as small as the tax rate on poor people.

This introduces an even stronger rich-get-richer mechanic to the society, as accumulating wealth generation (not just wealth) is tax-free.

[raverbashing]

That's easy to explain (although it might be tricky).

The marginal value of money decreases as the absolute value increases.

Getting a raise from $1k per month to $2k per month is more significant than from $2k to $3k

Meaning that if you earn more, you'll usually save more.

So now stuff is taxed at 50% (VAT or Sales tax), so everything will cost more, but it will be easier for the rich to afford it, because of no income tax, and harder for those with less income (their income tax was not high to begin with)

[wlievens]

Give every citizen a yearly vat tax credit?

[tobltobs]

Wouldn't that require another VAT tax hike to pay for the tax credits.

[wlievens]

I was replying to the hypothetical question of how to socially correct a consumption (mainly) based tax model.

[tobltobs]

If you have a low income and need all the money to buy food you get taxed on 100% of your income. If you have a lot of income and can save or invest 90% you only get taxed on 10% of your income.

[lsaferite]

If you are low income and they give everyone a tax refund on the first 30k or so of spending, then you perhaps pay 0% in taxes while the person spending over 30k starts paying a tax.