Raising Taxes

[KeepTalking]

No, I responded to that one separately, as it was a different idea than the one expressed in the Forbes article. Perhaps my use of sarcasm confused you despite my having used the sarcasm tag.

You could tax a certain low level of consumption at 0% if you want and any consumption beyond $1M at 99% if you wanted. Come on, at least try to understand the very basics of what you are attacking before you attack it.

That bears no relation to what was in the Forbes article. If you did not want to talk about what was in the Forbes article, you probably should not have linked to it.

Did you miss the very part you quoted which says:

You record your income, as usual, but all of that income that you have saved is deducted before whatever the tax rate is is applied.

...

If you’ve kept them in savings then they are not taxed: if you’ve taken them out of savings and spent them on consumption then they are added to your other income and taxed at whatever rate.

???

No, I didn't miss it, but if you are still taxing based on income it is hardly a consumption tax, and you seemed to be talking about a consumption tax.

Regardless, the whole idea that you can avoid paying taxes on your income by putting into savings is simply not progressive because the poor and middle class have little to no savings. It sounds like something that a rich person who is able to put most of their income into savings would come up with.

 

[Axulus]

No, I responded to that one separately, as it was a different idea than the one expressed in the Forbes article. Perhaps my use of sarcasm confused you despite my having used the sarcasm tag.

You could tax a certain low level of consumption at 0% if you want and any consumption beyond $1M at 99% if you wanted. Come on, at least try to understand the very basics of what you are attacking before you attack it.

That bears no relation to what was in the Forbes article. If you did not want to talk about what was in the Forbes article, you probably should not have linked to it.

Did you miss the very part you quoted which says:

You record your income, as usual, but all of that income that you have saved is deducted before whatever the tax rate is is applied.

...

If you’ve kept them in savings then they are not taxed: if you’ve taken them out of savings and spent them on consumption then they are added to your other income and taxed at whatever rate.

???

No, I didn't miss it, but if you are still taxing based on income it is hardly a consumption tax, and you seemed to be talking about a consumption tax.

Regardless, the whole idea that you can avoid paying taxes on your income by putting into savings is simply not progressive because the poor and middle class have little to no savings. It sounds like something that a rich person who is able to put most of their income into savings would come up with.

Sorry, my mistake. I edited the post. I glanced over it briefly and didn't realize the article was talking about only a flat rate above a threshold (where consumption below the threshold is taxed at 0%). Regardless, I'm not endorsing all the specifics of that article. I'm endorsing the conceptual basis as one of several possibilities for a progressive consumption tax, and the details of the rates can be tweaked as desired.

It becomes progressive simply by tweaking the rates. Why is this such a conceptual roadblock? We could tax the first $15,000 of annual consumption (or whatever) at 0%, the next $15,000 at 15%, the next $25,000 at 25%, the next $100,000 at 35%, and anything above that at 45%, etc.

And if a rich person wants to consume at the level of the middle class and save the rest to avoid the tax, what is wrong with that? That money then becomes available for capital investment. Money saved means that society's resources don't get used up and are therefore available for everyone else. Presumably that money will be spent at some point in the future and taxed at that time otherwise what's the point of saving?

 

[KeepTalking]

No, I responded to that one separately, as it was a different idea than the one expressed in the Forbes article. Perhaps my use of sarcasm confused you despite my having used the sarcasm tag.

You could tax a certain low level of consumption at 0% if you want and any consumption beyond $1M at 99% if you wanted. Come on, at least try to understand the very basics of what you are attacking before you attack it.

That bears no relation to what was in the Forbes article. If you did not want to talk about what was in the Forbes article, you probably should not have linked to it.

Did you miss the very part you quoted which says:

You record your income, as usual, but all of that income that you have saved is deducted before whatever the tax rate is is applied.

...

If you’ve kept them in savings then they are not taxed: if you’ve taken them out of savings and spent them on consumption then they are added to your other income and taxed at whatever rate.

???

No, I didn't miss it, but if you are still taxing based on income it is hardly a consumption tax, and you seemed to be talking about a consumption tax.

Regardless, the whole idea that you can avoid paying taxes on your income by putting into savings is simply not progressive because the poor and middle class have little to no savings. It sounds like something that a rich person who is able to put most of their income into savings would come up with.

Sorry, my mistake. I edited the post. I glanced over it briefly and didn't realize the article was talking about only a flat rate above a threshold (where consumption below the threshold is taxed at 0%). Regardless, I'm not endorsing all the specifics of that article. I'm endorsing the conceptual basis as one of several possibilities for a progressive consumption tax, and the details of the rates can be tweaked as desired.

It becomes progressive simply by tweaking the rates. Why is this such a conceptual roadblock? We could tax the first $15,000 of annual consumption (or whatever) at 0%, the next $15,000 at 15%, the next $25,000 at 25%, the next $100,000 at 35%, and anything above that at 45%, etc.

How do you accurately track that consumption? It would necessarily be more complicated than our current, and unnecessarily complicated, income tax code.

And if a rich person wants to consume at the level of the middle class and save the rest to avoid the tax, what is wrong with that?

The problem with that is the millionaire or billionaire is now getting taxed like they are middle class, so we have less tax revenue coming in, and are thus forced to raise taxes on the middle class so we can also get more taxes from those who are only pretending to be middle class while they funnel all of their taxes into savings.

 

[laughing dog]

Only responding to this because I'm short on time (will respond to the rest later). I have to do a huge Picard face palm here. You completely missed the part about brackets, didn't you? You could tax a certain low level of consumption at 0% if you want and any consumption beyond $1M at 99% if you wanted. Come on, at least try to understand the very basics of what you are attacking before you attack it.

Unless you have a system that tracks your consumption as you go and has that data available at cash registers when you check out how would the appropriate tax rate get applied as you made purchases throughout the year?

Technically, you don't need to keep track of spending. Since income is either taxed, consumed or saved, one could total up income and subtract taxes paid to other gov't units and subtract saving, thereby yielding the consumption tax liability.

If I buy that $750,000 house I've had my eye on does that count as $750,000 in consumption at the time of sale or would it get prorated over the life of the asset?

The biggest technical issue with a consumption tax is defining what is consumption and dealing with the implication of the definition. From an economic point of view, the purchase of any durable item represents consumption and saving since some of the item is not consumed during the tax year.

 

[Axulus]

No, I responded to that one separately, as it was a different idea than the one expressed in the Forbes article. Perhaps my use of sarcasm confused you despite my having used the sarcasm tag.

You could tax a certain low level of consumption at 0% if you want and any consumption beyond $1M at 99% if you wanted. Come on, at least try to understand the very basics of what you are attacking before you attack it.

That bears no relation to what was in the Forbes article. If you did not want to talk about what was in the Forbes article, you probably should not have linked to it.

Did you miss the very part you quoted which says:

You record your income, as usual, but all of that income that you have saved is deducted before whatever the tax rate is is applied.

...

If you’ve kept them in savings then they are not taxed: if you’ve taken them out of savings and spent them on consumption then they are added to your other income and taxed at whatever rate.

???

No, I didn't miss it, but if you are still taxing based on income it is hardly a consumption tax, and you seemed to be talking about a consumption tax.

Regardless, the whole idea that you can avoid paying taxes on your income by putting into savings is simply not progressive because the poor and middle class have little to no savings. It sounds like something that a rich person who is able to put most of their income into savings would come up with.

Sorry, my mistake. I edited the post. I glanced over it briefly and didn't realize the article was talking about only a flat rate above a threshold (where consumption below the threshold is taxed at 0%). Regardless, I'm not endorsing all the specifics of that article. I'm endorsing the conceptual basis as one of several possibilities for a progressive consumption tax, and the details of the rates can be tweaked as desired.

It becomes progressive simply by tweaking the rates. Why is this such a conceptual roadblock? We could tax the first $15,000 of annual consumption (or whatever) at 0%, the next $15,000 at 15%, the next $25,000 at 25%, the next $100,000 at 35%, and anything above that at 45%, etc.

How do you accurately track that consumption? It would necessarily be more complicated than our current, and unnecessarily complicated, income tax code.

And if a rich person wants to consume at the level of the middle class and save the rest to avoid the tax, what is wrong with that?

The problem with that is the millionaire or billionaire is now getting taxed like they are middle class, so we have less tax revenue coming in, and are thus forced to raise taxes on the middle class so we can also get more taxes from those who are only pretending to be middle class while they funnel all of their taxes into savings.

See laughingdog's description above on some of those details. The Forbes article also makes an attempt to define consumption (income plus or minus additions or withdrawals from financial accounts).

Yes, it may be more complicated to arrive at the consumption amount than just strictly the adjusted gross income amount of current, but it needn't be too much more complicated. The biggest issue as ld points out is how exactly consumption is defined. If not done correctly, it could make renting/leasing something way more favorable from a tax standpoint than buying it outright, which would be bad.

Finally, as I mentioned in previous posts, if the progressive consumption tax is insufficient to raise adequate revenue, then we could implement other various taxes. I'm not saying it must necessarily be the one and only tax. Perhaps we could have a low level tax on savings over a certain threshold, for example, in conjunction with it. We could have carbon taxes. These are just some of the possibilities.

 

[KeepTalking]

No, I responded to that one separately, as it was a different idea than the one expressed in the Forbes article. Perhaps my use of sarcasm confused you despite my having used the sarcasm tag.

You could tax a certain low level of consumption at 0% if you want and any consumption beyond $1M at 99% if you wanted. Come on, at least try to understand the very basics of what you are attacking before you attack it.

That bears no relation to what was in the Forbes article. If you did not want to talk about what was in the Forbes article, you probably should not have linked to it.

Did you miss the very part you quoted which says:

You record your income, as usual, but all of that income that you have saved is deducted before whatever the tax rate is is applied.

...

If you’ve kept them in savings then they are not taxed: if you’ve taken them out of savings and spent them on consumption then they are added to your other income and taxed at whatever rate.

???

No, I didn't miss it, but if you are still taxing based on income it is hardly a consumption tax, and you seemed to be talking about a consumption tax.

Regardless, the whole idea that you can avoid paying taxes on your income by putting into savings is simply not progressive because the poor and middle class have little to no savings. It sounds like something that a rich person who is able to put most of their income into savings would come up with.

Sorry, my mistake. I edited the post. I glanced over it briefly and didn't realize the article was talking about only a flat rate above a threshold (where consumption below the threshold is taxed at 0%). Regardless, I'm not endorsing all the specifics of that article. I'm endorsing the conceptual basis as one of several possibilities for a progressive consumption tax, and the details of the rates can be tweaked as desired.

It becomes progressive simply by tweaking the rates. Why is this such a conceptual roadblock? We could tax the first $15,000 of annual consumption (or whatever) at 0%, the next $15,000 at 15%, the next $25,000 at 25%, the next $100,000 at 35%, and anything above that at 45%, etc.

How do you accurately track that consumption? It would necessarily be more complicated than our current, and unnecessarily complicated, income tax code.

And if a rich person wants to consume at the level of the middle class and save the rest to avoid the tax, what is wrong with that?

The problem with that is the millionaire or billionaire is now getting taxed like they are middle class, so we have less tax revenue coming in, and are thus forced to raise taxes on the middle class so we can also get more taxes from those who are only pretending to be middle class while they funnel all of their taxes into savings.

See laughingdog's description above on some of those details. The Forbes article also makes an attempt to define consumption (income plus or minus additions or withdrawals from financial accounts).

Yes, it may be more complicated to arrive at the consumption amount than just strictly the adjusted gross income amount of current, but it needn't be too much more complicated. The biggest issue as ld points out is how exactly consumption is defined. If not done correctly, it could make renting/leasing something way more favorable from a tax standpoint than buying it outright, which would be bad.

Finally, as I mentioned in previous posts, if the progressive consumption tax is insufficient to raise adequate revenue, then we could implement other various taxes. I'm not saying it must necessarily be the one and only tax. Perhaps we could have a low level tax on savings over a certain threshold, for example, in conjunction with it. We could have carbon taxes. These are just some of the possibilities.

Okay, so given all of the above, I remain entirely unconvinced that a consumption tax is the answer. Instead, let's make sure the income tax we already have is truly progressive, especially as incomes approach and exceed millions of dollars. This should include closing loopholes that those at the higher marginal rates use to avoid paying a good amount of their taxes.

 

[Axulus]

No, I responded to that one separately, as it was a different idea than the one expressed in the Forbes article. Perhaps my use of sarcasm confused you despite my having used the sarcasm tag.

You could tax a certain low level of consumption at 0% if you want and any consumption beyond $1M at 99% if you wanted. Come on, at least try to understand the very basics of what you are attacking before you attack it.

That bears no relation to what was in the Forbes article. If you did not want to talk about what was in the Forbes article, you probably should not have linked to it.

Did you miss the very part you quoted which says:

You record your income, as usual, but all of that income that you have saved is deducted before whatever the tax rate is is applied.

...

If you’ve kept them in savings then they are not taxed: if you’ve taken them out of savings and spent them on consumption then they are added to your other income and taxed at whatever rate.

???

No, I didn't miss it, but if you are still taxing based on income it is hardly a consumption tax, and you seemed to be talking about a consumption tax.

Regardless, the whole idea that you can avoid paying taxes on your income by putting into savings is simply not progressive because the poor and middle class have little to no savings. It sounds like something that a rich person who is able to put most of their income into savings would come up with.

Sorry, my mistake. I edited the post. I glanced over it briefly and didn't realize the article was talking about only a flat rate above a threshold (where consumption below the threshold is taxed at 0%). Regardless, I'm not endorsing all the specifics of that article. I'm endorsing the conceptual basis as one of several possibilities for a progressive consumption tax, and the details of the rates can be tweaked as desired.

It becomes progressive simply by tweaking the rates. Why is this such a conceptual roadblock? We could tax the first $15,000 of annual consumption (or whatever) at 0%, the next $15,000 at 15%, the next $25,000 at 25%, the next $100,000 at 35%, and anything above that at 45%, etc.

How do you accurately track that consumption? It would necessarily be more complicated than our current, and unnecessarily complicated, income tax code.

And if a rich person wants to consume at the level of the middle class and save the rest to avoid the tax, what is wrong with that?

The problem with that is the millionaire or billionaire is now getting taxed like they are middle class, so we have less tax revenue coming in, and are thus forced to raise taxes on the middle class so we can also get more taxes from those who are only pretending to be middle class while they funnel all of their taxes into savings.

See laughingdog's description above on some of those details. The Forbes article also makes an attempt to define consumption (income plus or minus additions or withdrawals from financial accounts).

Yes, it may be more complicated to arrive at the consumption amount than just strictly the adjusted gross income amount of current, but it needn't be too much more complicated. The biggest issue as ld points out is how exactly consumption is defined. If not done correctly, it could make renting/leasing something way more favorable from a tax standpoint than buying it outright, which would be bad.

Finally, as I mentioned in previous posts, if the progressive consumption tax is insufficient to raise adequate revenue, then we could implement other various taxes. I'm not saying it must necessarily be the one and only tax. Perhaps we could have a low level tax on savings over a certain threshold, for example, in conjunction with it. We could have carbon taxes. These are just some of the possibilities.

Okay, so given all of the above, I remain entirely unconvinced that a consumption tax is the answer. Instead, let's make sure the income tax we already have is truly progressive, especially as incomes approach and exceed millions of dollars. This should include closing loopholes that those at the higher marginal rates use to avoid paying a good amount of their taxes.

And then you are back to having pretty much all the taxes falling on production and investment (income earning) instead of consumption (using up society's resources). Do you at least admit that producing things for our economy and investing in it is a more desirable activity than consuming society's resources? And yet because it is just a little too complicated for you, you don't even think it is worth trying (despite pretty much every country having such taxes, especially Europe).

Do you think France, Germany, Norway, Sweden, Canada, etc. should abandon their consumption taxes?

 

[PyramidHead]

I want to inject some skepticism about "closing loopholes" into this discussion. Obviously we need revenue, and the higher income brackets can be taxed more heavily to obtain it while still maintaining their wealthy status. But back to Axulus' point about desirable and undesirable things, loopholes can go a long way to incentivizing certain behaviors. If a very rich person donates a chunk of her income to a charity, she may avoid paying taxes on it due to a loophole that treats charitable donations as tax-exempt. If we close that loophole, she'll pay more in taxes, but maybe would be less inclined to donate to charity. If it's positive societal outcomes we are after, which is the point of having an economy in the first place, not all loopholes should be treated equally. I don't know if Warren Buffett is able to have a ~17% effective tax rate because his accountants gamed the system in a way that doesn't help society, or if he has used his income in ways that benefit society, which we encourage by making those behaviors tax-exempt.

 

[KeepTalking]

Okay, so given all of the above, I remain entirely unconvinced that a consumption tax is the answer. Instead, let's make sure the income tax we already have is truly progressive, especially as incomes approach and exceed millions of dollars. This should include closing loopholes that those at the higher marginal rates use to avoid paying a good amount of their taxes.

And then you are back to having pretty much all the taxes falling on production and investment (income earning) instead of consumption (using up society's resources).

We still have sales tax, which is a consumption tax, property (real estate) tax, estate tax, and in some states personal property taxes that go beyond real estate.

Do you at least admit that producing things for our economy and investing in it is a more desirable activity than consuming society's resources?

I was under the impression that both supply and demand are necessary for a well functioning economy.

And yet because it is just a little too complicated for you, you don't even think it is worth trying (despite pretty much every country having such taxes, especially Europe).

How complicated it is was only one of my complaints.

Do you think France, Germany, Norway, Sweden, Canada, etc. should abandon their consumption taxes?

I do not live in any of those countries, nor am I familiar with the way they have instituted consumption taxes. Which one of those countries uses the method of taxation you proposed that involves comparing income and savings to arrive at the amount of consumption that is taxed?

 

[Axulus]

We still have sales tax, which is a consumption tax, property (real estate) tax, estate tax, and in some states personal property taxes that go beyond real estate.

I'm primarily discussing the federal revenue scheme. States would be free to add on or implement whatever they want. Real estate taxes are state and local.

I was under the impression that both supply and demand are necessary for a well functioning economy.

And yet you wish to put pretty much 100% of the tax on supply rather than balancing it out. Why is that?

Furthermore, who said anything about what's necessary for the economy? We were talking about activities that were more desirable or less desirable for society. Who is doing the more valuable activity? The person who makes something (or provides the land, tools, equipment, machinery, patents etc. that allow others to make something), or the person who enjoys the benefits (consumption) of that something that is made? I would argue that the person making the thing is the one adding far more value to society. The one consuming the thing gets to enjoy the benefits of that thing, but by doing so that value of that specific item (which includes the resources that went in to making it) is no longer available for anyone else in society to enjoy (items of an intellectual property nature excluded).

Doesn't it make more sense to raise more revenue from the activities that are both less valuable to society and done more frequently by the wealthy instead of the activities that provide benefits to society (making things for people to consume and enjoy and the related investment/capital that requires)? The wealthy consume far more than your average Joe.

How complicated it is was only one of my complaints.

And that is the only remaining valid complaint. I've already addressed your other points: we can make it as progressive as desired, and we can raise revenue with other taxes if the consumption tax proves inadequate.

I do not live in any of those countries, nor am I familiar with the way they have instituted consumption taxes. Which one of those countries uses the method of taxation you proposed that involves comparing income and savings to arrive at the amount of consumption that is taxed?

They are generally regressive since they are collected through sales taxes or value added taxes, which you've said you strongly oppose. The method I propose is necessary to tweak how progressive it is.

 

[KeepTalking]

I was under the impression that both supply and demand are necessary for a well functioning economy.

And yet you wish to put pretty much 100% of the tax on supply rather than balancing it out. Why is that?

But that is not the case, even though you don't want to talk about it, every state has a sales tax, so we do tax both. I have not said that we should get rid of current sales taxes. On the other hand, I am not in favor of doing away with income taxes, and going with only consumption taxes (that would put all of the burden on the demand side). I especially dislike your proffered solution of using savings as a way of determining the consumption tax. Once again, this is because the lower and middle classes have little to no savings.

Furthermore, who said anything about what's necessary for the economy?

I just did. If wealth stagnates at the higher income brackets because they are not paying enough taxes, and no one is spending because they are saving everything to avoid paying taxes, then the economy suffers. Like it or not, one of the reasons for taxation is wealth redistribution, at least in the form social programs, when we encourage the rich to stockpile their money in savings so that they can pay less in taxes, then those programs suffer due to lack of revenue.

We were talking about activities that were more desirable or less desirable for society.

You keep saying that, but I have consistently said that I don't think that is a good reason for taxation. Sin taxes are bullshit. If an activity is that undesirable for society, you make it illegal. If it really isn't that undesirable that you don't want to make it illegal, let people do it without additional taxation.

The wealthy consume far more than your average Joe.

Not as a percentage of their income. The poor and lower middle class predominately live paycheck to paycheck, their entire income is used for consumption. The middle and upper middle class are not faring much better these days:

http://www.bloomberg.com/bw/articles/2014-08-12/only-45-percent-of-upper-middle-class-households-are-saving-money

Just 45 percent of upper-middle-class households (income from $75,000 to $99,999) saved anything in 2012, according to the Fed study. That means the other 55 percent didn’t save for a house, retirement, or education. About 16 percent spent more than they earned and went further into debt. The report highlights the consequences of these hand-to-mouth habits: Only half of these households had enough savings to finance three months of living expenses if they lost their job or couldn’t work. A $400 emergency would force about 20 percent of them into months of debt.

How complicated it is was only one of my complaints.

And that is the only remaining valid complaint.

How nice of you to claim victory on all other fronts. Unfortunately, you seem to not actually be paying attention to our discussion.

I've already addressed your other points: we can make it as progressive as desired, and we can raise revenue with other taxes if the consumption tax proves inadequate.

Why even try it when it is fraught with so many problems? The current income tax system would work just fine if we taxed labor and investment income at the same rate, went back to the marginal rates of the '80s, and added a number of higher income brackets that have higher marginal rates.

I do not live in any of those countries, nor am I familiar with the way they have instituted consumption taxes. Which one of those countries uses the method of taxation you proposed that involves comparing income and savings to arrive at the amount of consumption that is taxed?

They are generally regressive since they are collected through sales taxes or value added taxes, which you've said you strongly oppose. The method I propose is necessary to tweak how progressive it is.

Please link to the post where I said I strongly oppose "sales or value added taxes". I do strongly oppose the consumption tax you linked from Forbes as a replacement for income tax, and I am not sold on VAT taxes, especially if you intend to wholly replace income taxes with them. I am fine with sales taxes as long as they remain low, and are not meant to entirely replace other taxes, though I think that we could drop sales taxes on some necessities.