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Mercrom posted:Can someone explain to someone who doesn't know anything about economics why VAT is a regressive tax rather than just a flat tax? Why does where the money leaves the system matter? Isn't corporate and capital gains tax equally flat? Are income, wealth and estate taxes the only progressive taxes? I won't eat meaningfully more bread or drink meaningfully more milk, because every day needs are relatively stable for equivalent household sizes, which means that the proportion of my income that is taxed to provide for every day needs becomes smaller and smaller as my income rises. Even if I buy fancy milk and artisanal bread, it's not going to grow in proportion of my salary. What's far more likely to happen is that I will have a bigger house in a nicer area of a city, and have more disposable income left over. A VAT raise will impact the person earning 150k/yr very minimally, to the tune of a few percent of their total income. Losing a couple of extra hundreds to VAT for someone on a 25k/yr income may be the difference between them living in food insecurity or having trouble paying their bills.
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Mar 26, 2019 18:56
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Mercrom posted:Why does where the money leaves the system matter? Because taking £1,000 from a billionaire doesn't inconvenience them at all, but could make other people homeless Or kill them, if it's the US
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Mar 26, 2019 18:59
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Tax all billionaires everywhere 90% of their annual income and they won't stop being richer than they know what to do with but increase VAT and people in the lowest income brackets might go without food or drink ir have to decide between food or rent this week.
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Mar 26, 2019 19:06
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Herman Merman posted:If UBI is adopted it will be paid in advance, before the person is even able to make a purchase that would make him liable to pay the VAT. Same goes for any transfer payment paid as a part of the payroll taxation or welfare system, so I don't really see the issue. So what you're saying is: this doesn't solve VAT being non-progressive, at all. Mercrom posted:Isn't corporate and capital gains tax equally flat? Not when a country knows what it's doing, though there are surely countries that intentionally choose to make corporate and capital gains taxes flat, just as some foolish countries use a flat income tax.
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Mar 26, 2019 19:07
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Mercrom posted:Can someone explain to someone who doesn't know anything about economics why VAT is a regressive tax rather than just a flat tax? Why does where the money leaves the system matter? Isn't corporate and capital gains tax equally flat? Are income, wealth and estate taxes the only progressive taxes? flat taxes are regressive, because the utility of money is marginal. If it costs you 10k a year to live, and you earn 15k a year, and you are taxed 5k, you are completely broke. Hope you don't have any sudden costs, cause you're homeless if so. If we take that same 1/3rd flat rate, it still costs 10k a year to live, but this other dude earns 100k, so they have 66k to spend on caviar and horses and private schools and other incredibly stupid poo poo. VAT is worse than a flat tax because instead of being a % of income, it's a price increase for being alive. Lets say your expenses all have the same vat, and it's 20%. It now costs you 12k a year to live, you still earn 15k, you still get taxed 5k. Your net is now -2k a year, meaning you can pick between starving and becoming homeless, with the cool retro addition of being allowed to rack up debts you have no ability to ever pay from payday lenders who have no business existing before you pick between starvation and homelessness. The VAT here took 13% of your income, and it took 2% of the rich guys income. It made you homeless, but they didn't notice. Put in real information to your hearts content, but the general idea of VAT is that it is for things you probably need to live. The cost of being alive in any given country does not vary with income, so VAT is even more punitive than the already-stupid flat tax. banded Income, Wealth, CG and property taxes are the only good taxes, yes. They should top out at normal historic rates, mid-70s at the lowest.
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Mar 26, 2019 19:20
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fishmech posted:Not when a country knows what it's doing, though there are surely countries that intentionally choose to make corporate and capital gains taxes flat, just as some foolish countries use a flat income tax. I'm not sure about other countries, but in Germany corporate income tax and capital gains tax is set at a flat percentage so that conducting a trade via corporation gets taxed roughly the same level as trade income via other structures, i.e. at the highest tax bracket.
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Mar 26, 2019 19:28
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Welp, someone threatened Thierry Baudet (the FvD guy) on the internet so of course every political party in the Netherlands has to immediately distance themselves from it and he's getting the warm coddling treatment by the media. Nice, give him an even bigger platform guys. Nice country, good job. A leftist politician gets threatened and it's just meme-ing or jokes, right wing gets threatened OMGNO.
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Mar 26, 2019 20:00
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Spangly A posted:banded Income, Wealth, CG and property taxes are the only good taxes, yes. They should top out at normal historic rates, mid-70s at the lowest. They should top out above 100%. Put a hard incentive on people to say enough is enough and go do something useful with their lives rather than try to gently caress over everyone else for an extra dollar/euro/yen/whatever.
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Mar 26, 2019 20:01
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I think I get it. VAT is regressive because it disproportionately targets markets that are important to regular people, and even a flat income tax would in theory be better because it would make mansions increase in price as much as food.
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Mar 26, 2019 20:04
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What the gently caress is gonna happen to SA now that you can't host more than single words of a published source without paying for a license
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Mar 26, 2019 20:05
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Somfin posted:What the gently caress is gonna happen to SA now that you can't host more than single words of a published source without paying for a license You will finally be free.
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Mar 26, 2019 20:10
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Mercrom posted:I think I get it. VAT is regressive because it disproportionately targets markets that are important to regular people, and even a flat income tax would in theory be better because it would make mansions increase in price as much as food. Almost, it's not technically regressive, but it pretty much works out that way because of the marginal utility value of money. So if you have very little money you'll have to spend a very large % of it to live. Thus a large % of your money will get taxed and you'll pay a comparatively high % of your total money as tax. Whereas if you have a lot of money you don't spend as much as a % (or at the very least have the option to) and if you are super loving rich (say a billionaire) you literally can't even spend most of your money even if you wanted to because how many yachts can you really use? So less % of your money gets taxed and you spent less % on the taxes.
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Mar 26, 2019 20:11
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I don't think defining "regressive" that way is helpful since the marginal utility of money is impossible to measure. Most progressive income taxes are probably regressive by that definition.
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Mar 26, 2019 20:24
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Mercrom posted:I don't think defining "regressive" that way is helpful since the marginal utility of money is impossible to measure. Most progressive income taxes are probably regressive by that definition. My friend, not to pile on you but this is a word salad that doesn't mean anything. Of course you can't measure marginal utility. It's not a measure. Edit: To provide more context: no one is defining VAT as regressive, they are calling it so. A literal regressive tax (I really hope I am not overexplaining, apologies if so) would tax the poor more than the rich (and gives Tories wet dreams). VAT is flat (with nuances) because it's X% of every transaction. This ends up being regressive because 100$ for you are probably WAAAAAY more significant than 100$ for a millionaire. We cannot measure marginal utility, true, but there's no point in doing it, because what's important is the concept: 100$ is much more money to a poor person than to a rich person, being the same quantity of money. Say I earn 1000$ more. I am probably going to spend more, and my quality of life is going to be measurably better. Say Bill Gates earns 1000$ more. He'll never notice and that's probably just more money in some stupid financial instrument that probably harms us all. Again, sorry if you knew those things but I thought I'dd add stuff for anyone reading. "The marginal utility of X" is perhaps more difficult to understand and, as you said, impossible to measure, but marginality is an important concept in economics so let's explain it with some examples: The marginal rate of savings means: "If I earn X more, how much more will I save?" The marginal consumption is "If I earn X more, how much will I consume?" One important distinction in economics is that the marginal rate of consumption is high for poor people and low for rich people. If you give a poor person more money, there's surely stuff to buy for him or her: better food, some clothes, etc. For a rich person? Not so much. If you already eat caviar every day and drive all the Porsches you want, what else to spend it on? Marginal rate of savings is the opposite. If I live hand to mouth and I start earning more money, is it likely I save A TON more? No, I have expenses. I might save more but I'll probably spend it in necessities. If Bill gates earns more, the marginal rate of saving is probably close to 100% since it will, as I said, be dumped entirely in financial instruments. This is a quick and dirty explanation, the summary of which is "The marginal utility of money is larger for poor people than for rich people." I hope that made sense. Dawncloack fucked around with this message at 20:59 on Mar 26, 2019 |
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Mar 26, 2019 20:49
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Dawncloack posted:My friend, not to pile on you but this is a word salad that doesn't mean anything. Of course you can't measure marginal utility. It's not a measure. I guess I don't know what marginal utility means. What I meant was that while the utility of 100$ is different depending on how much money you have, utility is too nebulous to measure so we can't know exactly how much more 100$ is worth to a poor person than a rich person.
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Mar 26, 2019 20:58
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^^^^ Yeah my post wasnt helping, look at my edit now. Sorry I didn't give you a better answer first. And since we are discussing economics, and despite the fact that no one asked my opinion, here's a thing about economics that I think everyone should know. I have already explained the marginal rate of savings and consumption. I think that the lesson to extract is that it's way better to give money to poor people than to rich people. Here's the idea: An economy is kind of like a circulatory system. And, in both, trombosis is a loving big problem. You need the blood (money) flowing, not clotting up in some corner. Money given to the working class is going to be spent. Their grocers, shoemakers, babysitters, supermarkets, etc. will benefit, it's called the multiplicative effect. Don't forget that in order for anyone to sell, buyers must have money. Right wingers of all stripes insist that we have to give money to """""""""job creators""""""""" so that they invest in the economy. That is bullshit as we see today. Right now there's more money (fictional, but bear with me) in financial instruments than in investing in factories and hiring workers. So, all the Quantitative Easing money goes to financial BS instruments and people are hosed. Whatever they call it (making the labor market flexible, providing incentives for investment, fiscal credibility, "making hard choices", there is no alternative, work more to earn more, compassionate conservadurism, equal opportunities not equal outcomes....) whatever they call it, it's just mistaking their collective asses for their collective elbows, and giving money to those who will save it, nto spend it. I mean..... mistaking if it be called so because how long do you have to gently caress up till it's malice? Dawncloack fucked around with this message at 21:10 on Mar 26, 2019 |
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Mar 26, 2019 20:59
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The whole discussion is largely academic though because I'm not seeing a lot of German working poor escaping to America for their lack of VAT and progressive income taxes.
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Mar 26, 2019 21:03
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Mercrom posted:I guess I don't know what marginal utility means. What I meant was that while the utility of 100$ is different depending on how much money you have, utility is too nebulous to measure so we can't know exactly how much more 100$ is worth to a poor person than a rich person. this is only relevant if you also don't know how tax brackets work tho your measures are how many people live in relative poverty and how much capital accumulation is happening
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Mar 26, 2019 21:10
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I think I was just confused because people use the word regressive in different ways. If VAT is technically flat it means it would always be "net-progressive" if all the money earned through VAT was earmarked for UBI. Why do countries use VAT anyway? Because it taxes foreign goods? Specifically because it's not progressive?
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Mar 26, 2019 21:27
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Mercrom posted:Why do countries use VAT anyway? Because it taxes foreign goods? Specifically because it's not progressive? Because the rich make the tax rules, and it doesn't take a meaningful amount from them.
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Mar 26, 2019 21:36
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Because it's very hard to avoid, mostly. You can't really function in society without spending money and if you spend money anywhere else than the black market you're paying VAT, usually. Italy is insanely reliant on VAT to cover its otherwise remarkable deficiencies in its tax collection, to the point that each budget law includes what's called 'safeguard clauses,' ie if revenues fall below a certain threshold the difference is made up with, inter alia, hikes in VAT and fuel taxes. VAT is especially reliable, and is already at 22% for most goods. Budget issues in the future could raise it to 25%. It's very reliable as a revenue-raising method, but it can, and probably already does impact negatively on consumption (don't have much hard data on this, merely speculation since it's pretty high), offsetting in part some of the gains.
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Mar 26, 2019 21:38
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An insane mind posted:Welp, someone threatened Thierry Baudet (the FvD guy) on the internet so of course every political party in the Netherlands has to immediately distance themselves from it and he's getting the warm coddling treatment by the media. Nice, give him an even bigger platform guys. Nice country, good job. It's actually a good thing, because now protesters will know the limit for when they are peacefully protesting. And if something even less notable happens and these politicians still get upset, then you can officially add them to your guillotine to-do list. Mierenneuker fucked around with this message at 21:41 on Mar 26, 2019 |
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Mar 26, 2019 21:38
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Mercrom posted:Why do countries use VAT anyway? The state wants money. Preferably, the start wants to get that money in a convenient manner. A commercial transaction between two parties in which goods or services are exchanged for money reliably indicates that there is money. The state therefore takes some of that existing money to fulfill it's need for money. Because the money from the transaction is already there and the tax is just a flat percentage, this is a relatively easy and convenient way to raise money.
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Mar 26, 2019 23:06
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fishmech posted:So what you're saying is: this doesn't solve VAT being non-progressive, at all. It does solve it and it isn't even hard to see how, but keep being your obtuse self and disagreeing with me for the sake of the argument 
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Mar 26, 2019 23:27
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Herman Merman posted:It does solve it and it isn't even hard to see how, but keep being your obtuse self and disagreeing with me for the sake of the argument it doesn't at all, and the problem is that you don't seem to understand you can just have UBI without VAT, or that VAT being a regressive tax has literally nothing to do with what your government spends money on
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Mar 26, 2019 23:32
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Herman Merman posted:It does solve it. No, it doesn't. It shouldn't be hard to grasp that the poor are still taxed a much higher amount of their income with that system than the rich are. A valid solution would be something like "if you're poor enough, once you present identification VAT is voided or prorated from your bill" or something, though that has its own set of implementation issues and confusion in price messaging. Many countries already have some manner of way to identify that someone is exempt from sales tax/VAT on their purchase albeit usually in the context of nonprofit organizations making purchases in regular retail stores, and people trusted with organization funds carrying appropriate credentials. Like I hate to say it, but your "solution" sounds exactly the same as American "FairTax" libertarian campaigners - in case you didn't know what that is it's a plan to cut taxes on the rich and jack them massively on the poor by replacing all income taxes with very high sales tax or VAT on all goods, with the supposed solution for the very poor being that they will be issued extra payments to cover the new tax they pay on what they "should" be spending.
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Mar 26, 2019 23:40
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If VAT is the easiest way to collect tax, can't you compensate for it's inadequacy by what the government spends the money on? I guess there is a cap to how much wealth distribution you can achieve with UBI-funded VAT, but it's still a lot of potential wealth distribution. You are still taking money from the billionaires who own the companies that sell the taxed goods. Is it practically possible to collect as much tax without VAT as with VAT? If the government spends the money well wouldn't more taxation always be better?
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Mar 27, 2019 06:51
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VAT is an easy way to collect tax from everybody who consumes goods, but a large proportion of billionaires' wealth is not generated through sale of goods for domestic consumption necessarily, but rather through investments (capital gains taxes help here) or companies (various forms of corporate taxation help here), or it's outright offshored (the system currently has no defense from this, as evidenced with the Panama Papers scandals and their political fallout [or lack thereof]) so if you want to target the upper income brackets there's more focused instruments than a blanket tax on domestic consumption that also coincidentally weighs the most, proportionally to income, on the lower income brackets. This is assuming you actually want to achieve some manner of redistribution, but even then redistributive results aren't going to be great since you're not actually hitting the big targets.
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Mar 27, 2019 09:29
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I keep failing to understand economics. I guess as long as there is economic growth capitalists can effortlessly grow their capital unless you have high capital gains or wealth tax, and VAT won't curtail growth so it won't affect capitalists.
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Mar 27, 2019 09:46
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VAT is a tax on private consumption, and anyone who likes selling things wants to maximise personal consumption this is also one reason why it's such an attractive way to raise funds, since it directly dovetails with the central principle of a market economy, i.e. selling poo poo to people for money
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Mar 27, 2019 09:56
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Also from my personal experience at least the vast majority of wealthy people has at least one company/foundation that they use to deduct VAT from their taxes again anyway, making it even more regressive.
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Mar 27, 2019 10:03
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Osmosisch posted:Also from my personal experience at least the vast majority of wealthy people has at least one company/foundation that they use to deduct VAT from their taxes again anyway, making it even more regressive.
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Mar 27, 2019 11:11
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Osmosisch posted:Also from my personal experience at least the vast majority of wealthy people has at least one company/foundation that they use to deduct VAT from their taxes again anyway, making it even more regressive. I don't really understand how that is supposed to work.
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Mar 27, 2019 11:28
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Hambilderberglar posted:If I make 150000/yr, the proportion of my income that goes to a tax like VAT is meaningfully smaller than if my income were 25000/yr. You picked two examples, bread and milk, which are zero rated in the UK. Some countries do charge, but then thats a problem of implementation rather than an inherent flaw with VAT.
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Mar 27, 2019 11:28
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Randler posted:I don't really understand how that is supposed to work. For example, I can buy a car for my company with a lease, which counts VAT as a expenditure, thus paying less taxes.
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Mar 27, 2019 11:31
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Randler posted:I don't really understand how that is supposed to work. can't decide if this is a white-tier or gold-tier trap
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Mar 27, 2019 11:36
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Cerv posted:You picked two examples, bread and milk, which are zero rated in the UK. Even if your implementation charges some things like basic foodstuffs at 0 it's still a regressive tax though. The moment your income is enough that you can afford to have savings, that's income not taxed by VAT. Maybe there's a sweet spot where it impacts the lower middle class more than the poor, but as long as consumption doesn't scale to match income infinitely upwards it's never going to impact the rich as much as people under them.
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Mar 27, 2019 11:36
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Fat Samurai posted:For example, I can buy a car for my company with a lease, which counts VAT as a expenditure, thus paying less taxes. When a company buys a car for 12,000 (thereof 2,000 VAT), shouldn't it only recognize expenditures in the net amount (10,000) because the input VAT gets reimbursed? Because that's how I thought VAT works when a company purchases something. And this would result in the expenditures for income tax purposes (10,000) being actually lower than the amount of money (12,000) that is being paid, i.e. the company actually has a higher tax base.
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Mar 27, 2019 11:45
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Dawncloack posted:To provide more context: no one is defining VAT as regressive, they are calling it so. A literal regressive tax (I really hope I am not overexplaining, apologies if so) would tax the poor more than the rich (and gives Tories wet dreams). But poor people do pay more (a higher percent of their income). That's why it's regressive. For the same reason, you can't say a flat 30% tax is progressive, even though rich people pay "more".
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Mar 27, 2019 12:07
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Randler posted:When a company buys a car for 12,000 (thereof 2,000 VAT), shouldn't it only recognize expenditures in the net amount (10,000) because the input VAT gets reimbursed? Because that's how I thought VAT works when a company purchases something. And this would result in the expenditures for income tax purposes (10,000) being actually lower than the amount of money (12,000) that is being paid, i.e. the company actually has a higher tax base. Not if you finance the car, then you can consider VAT a expenditure that you spread over the life of the loan, by transforming the entire thing into sort of a rental. Alternatively, annual depreciation of the car (an asset) will mean less taxes anyways (that's the expenditure, not the initial purchase), although this isn't related to VAT in particular. *Based on an nebulous memory of an accounting class like 10 years ago.
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Mar 27, 2019 12:51
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