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http://www.npr.org/blogs/money/2012/07/19/157047211/six-poli...

Six Policies Economists Love (And Politicians Hate)

One: Eliminate the mortgage tax deduction
Two: End the tax deduction companies get for providing health-care to employees
Three: Eliminate the corporate income tax
Four: Eliminate all income and payroll taxes
Five: Tax carbon emissions
Six: Legalize marijuana
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I only questioned one of them, but then I found the footnote below. Suggest you update the OP.
Quote:
Note: This post was updated to make clear that the income tax would be replaced with a consumption tax. That's in the original show, but was inadvertently omitted from the summary above.
Some angles on this:
* Taxing income has some bad aspects: for example it constrains consumer choice, makes saving less attractive, and induces double taxation on income from savings and investments (usually leading to additional regulations)
* Taxing consumption, if done well, is "fair" in economic terms across all levels of income and consumption.
* Taxing consumption is potentially simpler, because there are fewer special cases (consumption paid for by companies etc gets a little harder to handle, almost everything else gets simpler)
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Boaty McBoatface
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Taxing consumption reduces peoples ability to buy goods, after all it has to ensure the same revenues as the income tax it replaces. So it's hard to see how people will pay less, unless they consume less.
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slatersteven wrote:
Taxing consumption reduces peoples ability to buy goods, after all it has to ensure the same revenues as the income tax it replaces. So it's hard to see how people will pay less, unless they consume less.


This has been endlessly answered and re-answered and then answered again all the way back to 40 years ago (in my reading history). The most simple way is to have people file at the end of the year for a refund of any portion of the consumption tax they paid during the year. So if your family income is higher than the top level that qualifies for any refund at all, you never file. You've paid your taxes as you consumed throughout the year.

The IRS would be decimated, probably lose 90% of their staff. It's simple and it really doesn't even affect the poor as almost every one of them already receive food stamps, medicaid and other non-taxed services.

Simple stuff.
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DWTripp wrote:
slatersteven wrote:
Taxing consumption reduces peoples ability to buy goods, after all it has to ensure the same revenues as the income tax it replaces. So it's hard to see how people will pay less, unless they consume less.


This has been endlessly answered and re-answered and then answered again all the way back to 40 years ago (in my reading history). The most simple way is to have people file at the end of the year for a refund of any portion of the consumption tax they paid during the year. So if your family income is higher than the top level that qualifies for any refund at all, you never file. You've paid your taxes as you consumed throughout the year.

Not sure how that answers it really, as you will refund the tax on those who earn below a certain amount, and those that earn above it will spend less, because they will have less spending power because process will have to rise. This will also lead to reduced revenues which will mean speeding cuts (which generally affect the poor).

Simple stuff.


Not sure how that answers it really, as you will refund the tax on those who earn below a certain amount, and those that earn above it will spend less, because they will have less spending power because process will have to rise. Indeed the tax will fall heavily on a small group (ironically the ones who whine about taxes the most, the well off), who will also be most able to avoid it (and indeed who avoid paying tax anyway). Of course it will provide a huge economic boost to Mexico and Canada, but I was not aware that was an overriding goal of American economic policy.

Also this will require everyone to keep (and get) receipts for every purchases they made (and where do services fit in, are they taxed as consumption?). Of course it means we may all have to hire accountants (great for the accountancy) business to help fill out these new and complex tax forms.
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gyc365 wrote:
I:
* Taxing income has some bad aspects: for example it constrains consumer choice, makes saving less attractive, and induces double taxation on income from savings and investments (usually leading to additional regulations)

double taxation is a codeword, not a real concept. You can make it mean whatever you want it to mean.

In the real world, any activity that can be tracked can get taxed. Double taxation? It just means 'I want to pay less taxes'.
Quote:

* Taxing consumption, if done well, is "fair" in economic terms across all levels of income and consumption.

Nothing is fair. Something is only fair by a given definition of fair, that one chooses among many options. You might as well say 'God is good'.
Quote:

* Taxing consumption is potentially simpler, because there are fewer special cases (consumption paid for by companies etc gets a little harder to handle, almost everything else gets simpler)

Not really. Income taxes could be extremely simple if we wanted them to be. If you do not want it to be, it can be extremely complicated no matter what the baseline is.

I can only imagine how quickly people would start complaining about offshore consumption if we switched to a consumption based tax system. Save in the US, spend in the Caribbean?
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hibikir wrote:
gyc365 wrote:
I:
* Taxing income has some bad aspects: for example it constrains consumer choice, makes saving less attractive, and induces double taxation on income from savings and investments (usually leading to additional regulations)

double taxation is a codeword, not a real concept. You can make it mean whatever you want it to mean.

In the real world, any activity that can be tracked can get taxed. Double taxation? It just means 'I want to pay less taxes'.
Quote:

* Taxing consumption, if done well, is "fair" in economic terms across all levels of income and consumption.

Nothing is fair. Something is only fair by a given definition of fair, that one chooses among many options. You might as well say 'God is good'.
Quote:

* Taxing consumption is potentially simpler, because there are fewer special cases (consumption paid for by companies etc gets a little harder to handle, almost everything else gets simpler)

Not really. Income taxes could be extremely simple if we wanted them to be. If you do not want it to be, it can be extremely complicated no matter what the baseline is.

I can only imagine how quickly people would start complaining about offshore consumption if we switched to a consumption based tax system. Save in the US, spend in the Caribbean?


Simple tax system, all wages are paid to the excehequre who deduct your tax for you then give you the remainder. NO one who works in the USA may be paid anyother way.
 
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In Canada most provinces have two consumption taxes in addition to income tax, as well as the myriad of other taxes and fees one pays continually.

The two consumption taxes are one at the provincial level and another at the federal level. Some provinces have elected to combine their consumption tax with the federal consumption tax as a matter of efficiency. So, for example, in Ontario, one pays the Harmonized Sales Tax, part of which goes to the federal government and part to the Ontario provincial government.

In Quebec, first the Federal consumption tax is applied. This is 5% and it is called the Goods and Services Tax (GST). This answers the question up-thread about whether one can tax services as well.

Once that's totalled up, Quebec applies its own 8.5% on the whole thing. That's are infamous tax on tax, such that one pays 8.5% tax on the previous 5% tax.

Everyone pays these consumption taxes, except those who are exempt such as aboriginal Canadians.

Only end consumers pay the tax. That is, vendors keep track of the consumption taxes they've paid out and the consumption taxes they've collected on behalf of the government. They remit the difference. So, their is a chain of accounting all throughout the economy and the only ones who actually go out of pocket are end consumers, whether individuals or businesses.

The federal and provincial governments have various tax credit programs that change all the time. Part of any money paid out to low-income and no-income filers is an offset to the consumption taxes. So, for example, right now in Quebec one would get a monthly social solidarity tax credit in differing amounts depending on one's tax filing.


As I understand it, the main issue with consumption taxes is that it's not progressive, unless you add in some kind of seperate offset.

Oh yeah, and certain things are not taxed such as food groceries. So, if you buy a doughnut, that's taxed because it's a snack. If you buy 6 doughnuts in the supermarket, that's groceries and wouldn't be taxed. Laundry detergent--taxed.
.
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slatersteven wrote:


Not sure how that answers it really, as you will refund the tax on those who earn below a certain amount, and those that earn above it will spend less, because they will have less spending power because process will have to rise.


That's just not true. Nor do you have anything to back it up. All taxes reduce spending "power" in some way as they are taking money that you cannot spend now. If you think that a guy earning a million $ a year is going to not buy a BMW or Mercedes because of a $1,000 tax difference between it and a Ford Focus, then you are out of touch with reality.

Quote:
Indeed the tax will fall heavily on a small group (ironically the ones who whine about taxes the most, the well off), who will also be most able to avoid it (and indeed who avoid paying tax anyway).


You remind me of the old Jewish mother. She buys her son two ties for his birthday, a red one and a green one. Then he goes over to her house for dinner wearing the green tie. She looks at him and says, "So, you didn't like the red one?"

No tax system is perfect. I thought the RSP hive mind wants wealthy people to pay more. Well then? Consumption tax isn't "voluntarily" sent in after being massaged by tax experts. It's rung up and paid at the counter.

Quote:
Also this will require everyone to keep (and get) receipts for every purchases they made (and where do services fit in, are they taxed as consumption?). Of course it means we may all have to hire accountants (great for the accountancy) business to help fill out these new and complex tax forms.


Unreal. Slater! Wake up! Tax is collected at point of sale and sent along to the government. Exactly like businesses have been doing for easily over 100 years. No fuss, no muss.
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Any administrative infrastructure that can manage Sales Taxes / Value Added Tax etc already has most of the capabilities required to implement Consumption-based taxation.

All that's missing is to extend to individuals the kind of information businesses use to ensure VAT is paid only on transactions to final customers. The pieces are there, but keyed to businesses rather than individuals.

Note that Income Tax is very expensive to administer. Consumption-based taxation doesn't have to be free to be administratively efficient. It just has to be less expensive than Income-based taxation - a rather easy target.
 
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What will happen will happen...

But the first thing that occurs to me is that changing to a consumption tax would be massive double taxation of any money saved outside of tax free retirement accounts.

I.e. you pay whatever tax rate you pay (15% to 35%) and manage to save up $100k.

Now the tax system changes and you pay $30k on that $100k as you spend it.

It would be a tax break for IRA's and 401k- perhaps- (if the consumption tax was lower than the tax rate you deferred).

I don't see any sudden changes.

Just keep in mind that Bond elections are really votes to increase your taxes.
 
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Psauberer wrote:

Six Policies Economists Love (And Politicians Hate)

One: Eliminate the mortgage tax deduction
Two: End the tax deduction companies get for providing health-care to employees
Three: Eliminate the corporate income tax
Four: Eliminate all income and payroll taxes
Five: Tax carbon emissions
Six: Legalize marijuana


Firstly I don't automatically trust any random economist over any random politician. There's approximately the same chance that they're both peddling idealistic bunkum.

That said:
1) The UK did away with this a long time back. Society didn't collapse but it didn't prevent a huge property speculation bubble either.
2) Seems reasonable.
3) I can see the argument for it in a properly structured corporate/social environment. But we would need to fix our current mess before adopting this. The theory of corporate behaviour and value is all very well but bears no resemblance to what we currently have. Which is corporations serving as elaborate tax-shelters, toys for the executive aristocracy and a means to bilk society via abuse of limited liability laws.
4) Sounds nice but is this so we can (a) replace it with something else or (b) simply slash government revenue in an orgy of libertarian self-love? I defy anyone to devise a "fair" consumption tax that will generate sufficient revenue without fomenting revolution.
5) Hell yes. Tax them to the hilt. I think the developed nations are going to have to address their profligate wasting of energy as an urgent matter of national security soon enough, whether or not they care about the environmental issues.
6) Yes this is one of my favourites. Prohibition doesn't work and there's a huge industry here waiting to be brought into the light. It will also undermine the financial base of several of society's less edifying groups.
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DWTripp wrote:
slatersteven wrote:


Not sure how that answers it really, as you will refund the tax on those who earn below a certain amount, and those that earn above it will spend less, because they will have less spending power because process will have to rise.


That's just not true. Nor do you have anything to back it up. All taxes reduce spending "power" in some way as they are taking money that you cannot spend now. If you think that a guy earning a million $ a year is going to not buy a BMW or Mercedes because of a $1,000 tax difference between it and a Ford Focus, then you are out of touch with reality.


There are people in America who do not earn $1,000,000 PA you know. Unless you are saying that only those who earn $1,000,000 + will not have tax refunded this is a really facile point.

Quote:
Quote:
Indeed the tax will fall heavily on a small group (ironically the ones who whine about taxes the most, the well off), who will also be most able to avoid it (and indeed who avoid paying tax anyway).


You remind me of the old Jewish mother. She buys her son two ties for his birthday, a red one and a green one. Then he goes over to her house for dinner wearing the green tie. She looks at him and says, "So, you didn't like the red one?"

No tax system is perfect. I thought the RSP hive mind wants wealthy people to pay more. Well then? Consumption tax isn't "voluntarily" sent in after being massaged by tax experts. It's rung up and paid at the counter.

I did not say pay more, I belive I said they will find ways to pay less. Also I don't want to rich to pay more tax, and nor do you so why do you support this?

Quote:
Quote:
Also this will require everyone to keep (and get) receipts for every purchases they made (and where do services fit in, are they taxed as consumption?). Of course it means we may all have to hire accountants (great for the accountancy) business to help fill out these new and complex tax forms.


Unreal. Slater! Wake up! Tax is collected at point of sale and sent along to the government. Exactly like businesses have been doing for easily over 100 years. No fuss, no muss.


I was talking about the idea that those who earn below a certain amount can recalim this tax, surley they would have to prove they have paid it in the first place to reclaim it?
 
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DWTripp wrote:

This has been endlessly answered and re-answered and then answered again all the way back to 40 years ago (in my reading history). The most simple way is to have people file at the end of the year for a refund of any portion of the consumption tax they paid during the year. So if your family income is higher than the top level that qualifies for any refund at all, you never file. You've paid your taxes as you consumed throughout the year.

The IRS would be decimated, probably lose 90% of their staff. It's simple and it really doesn't even affect the poor as almost every one of them already receive food stamps, medicaid and other non-taxed services.


It would insure that the poor remain poor. Folks that already live hand to mouth couldn't wait until the end of the year and can't afford an accountant. What is your solution?
 
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Consumption tax is also problematic as wealthy people don't spend proportionally more than the middle class. In addition, their money spent isn't necessarily in the US. If you want to spend $2 million on this you get it from the original company overseas:
 
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bjlillo wrote:
sisteray wrote:
DWTripp wrote:

This has been endlessly answered and re-answered and then answered again all the way back to 40 years ago (in my reading history). The most simple way is to have people file at the end of the year for a refund of any portion of the consumption tax they paid during the year. So if your family income is higher than the top level that qualifies for any refund at all, you never file. You've paid your taxes as you consumed throughout the year.

The IRS would be decimated, probably lose 90% of their staff. It's simple and it really doesn't even affect the poor as almost every one of them already receive food stamps, medicaid and other non-taxed services.


It would insure that the poor remain poor. Folks that already live hand to mouth couldn't wait until the end of the year and can't afford an accountant. What is your solution?


The Fair Tax uses a pre-bate rather than submitting at the end of the year.


A prebate would certainly employ a lot of government jobs.
 
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sisteray wrote:
bjlillo wrote:
sisteray wrote:
DWTripp wrote:

This has been endlessly answered and re-answered and then answered again all the way back to 40 years ago (in my reading history). The most simple way is to have people file at the end of the year for a refund of any portion of the consumption tax they paid during the year. So if your family income is higher than the top level that qualifies for any refund at all, you never file. You've paid your taxes as you consumed throughout the year.

The IRS would be decimated, probably lose 90% of their staff. It's simple and it really doesn't even affect the poor as almost every one of them already receive food stamps, medicaid and other non-taxed services.


It would insure that the poor remain poor. Folks that already live hand to mouth couldn't wait until the end of the year and can't afford an accountant. What is your solution?


The Fair Tax uses a pre-bate rather than submitting at the end of the year.


A prebate would certainly employ a lot of government jobs.


Also if it's a pre-bate, and everyone gets it would this not in effect give the rich the same help and subserdy as the poor? Thus
government handouts would be used to help those who don't need it, how is that progresive?
 
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Alaren wrote:
It has been known since 1978 (and likely earlier) why tax reform is impossible.



Sounds like they were having the same futile conversation in the 1970’s about getting rid of deductions and taxing at a lower flat rate, something the left and right could perhaps agree on but the rent seeking is simply too entrenched. This seems hard to believe but Friedman claims that a flat rate of 16% back then would have generated the same revenues as the 14%-70% percent system that existed.
 
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Australia's taxation system:

Goods & Services Tax (consumption tax) - 10% on all purchases that are not fresh food or books (with a few other odd exceptions).

Pay As You Go income tax - a proportion of your gross wage is retained by your employer who, each month, must remit the total to the tax office. At the end of the financial year you fill out a tax form, and might get a small amount back (more if you have deductible expenses).

We have company tax as well, generally 30-odd%, and a range of other less well known taxes (less well known because they are specialised, and frequently disguised by being called something other than "tax", such as "duty" or "excise"), but GST, PAYG, and company tax are the three main ones that the average citizen will encounter.

The GST was introduced in 2000, and replaced a range of sales taxes ranging from 8% to 40-something % (and they were mostly 15% - 22%). The intention is (was - it may never be achieved) to increase the GST to 15% or 17% while removing other taxes.

The GST saw no decrease in spending, and nobody goes without because of tax being taken directly from their pay (there is a minimum threshold, too). In addition, few people without large investments find themselves needing to pay a tax bill at the end of the financial year.

Works fairly well, even though it, like every other taxation system, needs further work. Brilliantly turned every business into unpaid tax-gatherers on behalf of the ATO
 
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Psauberer wrote:

Five: Tax carbon emissions


taxing emissions is stupid tax at source
is the only way that can work.
 
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"Increasing government spending has always been politically more profitable than reducing taxes."
- Milton Friedman

Oh, I'm sure that's just some more of that libertarian mumbo-jumbo right there, designed to kill the poor in order to further the interests of John Galt.

whistle


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fightcitymayor wrote:
"Increasing government spending has always been politically more profitable than reducing taxes."
- Milton Friedman

Oh, I'm sure that's just some more of that libertarian mumbo-jumbo right there, designed to kill the poor in order to further the interests of John Galt.

whistle




but not as profitable as increasing spending and cutting taxes.
 
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