My father and I had a conversation last night about taxing income vs. taxing consumption. He made a pretty good point that it seems rather illogical to heavily tax someones income or essentially productivity. If I were to earn a higher income and be taxed heavily, it kindof takes the incentive (at least for me) to really want to work harder. Also since we def. consume way more than we should be doing, it seems that taxing consumption would be a much better option. I realize consumption in the US = 2/3rds of GDP. However, simply overly encouraging consumption seems fatally flawed. Eventually its going to backfire for both consumers and businesses. 1: Consumers. Spending beyond means. 2: Businesses have built stores, stocked inventories, hired employees, etc… to meet the overspending or how id like to look at it as a “false level of production.” B/c essentially businesses are catoring to a mkt that will implode. Hope that last part wasnt too far off track. What are your thoughts?
I am also curious what members of this forum think about this. Huckabee proposed a flat tax of 23% by taxing sales and having no income tax. It sounds great on paper as this would force those who engage in black market activities to be taxed just like everyone else. My question is could it work?
I am also curious what members of this forum think about this. Huckabee proposed a flat tax of 23% by taxing sales and having no income tax. It sounds great on paper as this would force those who engage in black market activities to be taxed just like everyone else. My question is could it work?
People with big incomes want consumption tax. People with little incomes want income tax. Politicians want to get elected. Do the math.
Would states/cities/counties be able to add their own tax onto the fed flat tax in such a plan? Chicago’s sales tax just went to an incredible 10.25%, which is in addition to state income tax (3% if i remember correctly - it’s been a few years) and of course the fed’s grab.
Chicago’s sales tax is 10.25%!!! Holy Crap! I hate people who think that rates should rise just like inflation rises. I heard a dumbass waiter say that tips should be 20% instead of 15% because of inflation.
The guy that pushed it through actually wanted to take it to 11.25%. Here’s the article: http://www.chicagotribune.com/news/local/chi-countybudget-sundayfinalmar02,0,154534.story?page=1
The problem with a consumption tax is that without initially redistributing all currently heald savings is that it will lead to feudalism. The Buffet’s Gates’, etc. of the country will continue to invest their capital and never pay taxes on almost all of their holdings. This money will be passed for generation to generation. Historically, this has caused numerous empires to fall in the past thousands of years. (I wish politicians studied history) The only way I see a consumption tax to work is to also impement a 100% death tax.
Was it Buffett that said the short term capital gains tax should be 100%?
I believe the lvl II Economics section touched on this and supported that a consumption tax is more efficient than an income tax. Partly, a consumption tax disciplines spending and discourages bad (< required rate of return) investments by businesses. It should also encourage savings to partly remedy our current deficits. I like the viewpoint that an income tax is a tax on productivity. I remember in college we call it “distortionary”
phBOOM Wrote: ------------------------------------------------------- > I believe the lvl II Economics section touched on > this and supported that a consumption tax is more > efficient than an income tax. Partly, a > consumption tax disciplines spending and > discourages bad (< required rate of return) > investments by businesses. It should also > encourage savings to partly remedy our current > deficits. > In theory, yes, but please look to history were such systems will create few families with vast amounts of wealth. To keep capitalism moving, money has to be kept moving.
phBOOM Wrote: ------------------------------------------------------- > I believe the lvl II Economics section touched on > this and supported that a consumption tax is more > efficient than an income tax. Partly, a > consumption tax disciplines spending and > discourages bad (< required rate of return) > investments by businesses. It should also > encourage savings to partly remedy our current > deficits. > > I like the viewpoint that an income tax is a tax > on productivity. I remember in college we call it > “distortionary” Interesting. I realize history may say a different story. But perhaps there were other reasons that contributed to the failure of taxing consumption over taxing income. This is very intriguing and id like to explore this further.