Wealth distribution

[Seamus Fermanagh]

I favour taxing what is owned rather than what is earned, even though the end result probably isn't that big since the state has to rake in the same amount of money, and that for the most part means the same people paying.

I could go on and on about how wealth taxation is better than income taxation, as the last election in Norway had removal of wealth taxation as one of the hot issues, and I argued endlessly with friends on how we should instead increase the wealth tax and reduce the income tax. The biggest problem with the wealth tax is the human brain: we react strongly to something being "taken away"(why do I have to pay tax on this house I already paid for?!?!?), but we don't really react at all if we don't get the chance to buy that thing. But since we seem to be all in agreement here, I won't do the wall of text-thing now...

Clear thinking on your part. If your goal is wealth redistribution from rich to poor (I don't agree with that goal as you know, but that does seem to be the goal behind using taxation to re-balance society) then taxing anything aside from wealth is counterproductive. Taxing income means taxing the actively employed middle class...the backbone of all Western economies...but only taxes the "current accounts" of the rich.

It is one of the things I find idiotic in the USA right now. We have a progressive income tax that, in practice, hammers the upper middle class and drains the wealth accumulation potential of the working class, while shielding from taxation the very people the US political left blames for the imbalance. The solution? Higher taxes on corporations (which are passed to the working class in higher prices) and higher income taxes on wage earners over 150k (which includes lots of owner operator small businesses and other small business employers, thus discouraging job creation; and yes, it does take thousands of dollars more from the salaries of big corp CEOs....who make less than 20% of their compensation in salary and are taxed at 15% (lower then their staff's income tax rates) on the rest.

The system, as currently constituted, is inane.

Give me a modified consumption tax like the Fair Tax or a flat tax on all earnings (of any form or stripe, no exceptions).

[HoreTore]

If your goal is wealth redistribution from rich to poor

Taxation is only "a means to a means to an end", it is not the way to achieve the goal.

As I said previously, taxation is only important due to what you can do with that tax money. The actual answer to poverty is meaningful employment in private sector jobs with proper wages, for all. Taxation alone isn't going to do anything towards that goal.

Even though I agree with you on wealth v income tax, I wouldn't go so far as to abolish the income tax altogether. Tax diversification is also important, both to ensure a stable tax revenue(you can't plan long term without stability) as well as lessen the impact of loopholes.

But even more important, the process needs to be simple. If I need to do anything more than I currently do to pay my taxes(which is reading a letter from the government every january for half a minute before throwing it in the trash), I'll storm the bastille.

[Pannonian]

Give me a modified consumption tax like the Fair Tax or a flat tax on all earnings (of any form or stripe, no exceptions).

How does a Fair Tax work better than Income Tax? As I understand it, it's a kind of Value Added Tax, which in the UK has been noted as working against the poor as the tax paid on necessities is a much bigger slice of their overall resources than that paid by the rich.

[Lemur]

[A FairTax] has been noted as working against the poor as the tax paid on necessities is a much bigger slice of their overall resources than that paid by the rich.

There are actually terms for this.

A tax that gets smaller as more wealth is involved is called a regressive tax.

A tax whose marginal rate increases as more wealth is involved is called a progressive tax.

[Seamus Fermanagh]

How does a Fair Tax work better than Income Tax? As I understand it, it's a kind of Value Added Tax, which in the UK has been noted as working against the poor as the tax paid on necessities is a much bigger slice of their overall resources than that paid by the rich.

Not sure if it would function as well as designed in practice. The Fair Tax is supposed to function as noted here. Yes, it is a wiki, but it is pretty religiously "policed" by Fair Tax advocates and is a fair summary of their approach. The basic idea is to be revenue neutral, but to tap into currently untaxed aspects of the economy (black and gray markets because the money is eventually used to buy something that is subject to the tax). Ostensibly, the Fair Tax would replace ALL other forms of federal taxation -- excises, income tax, Spanish war tax on telephones etc. Supposedly, the "prebate" lowers the effective tax burden on lower income families, down to an effective federal tax burden of 0% on necessities.

The Fair Tax has detractors as well, who argue that it is a waste of time because it won't work as planned or, more commonly, because it is politically undoable and hence a waste of time.

[Pannonian]

Not sure if it would function as well as designed in practice. The Fair Tax is supposed to function as noted here. Yes, it is a wiki, but it is pretty religiously "policed" by Fair Tax advocates and is a fair summary of their approach. The basic idea is to be revenue neutral, but to tap into currently untaxed aspects of the economy (black and gray markets because the money is eventually used to buy something that is subject to the tax). Ostensibly, the Fair Tax would replace ALL other forms of federal taxation -- excises, income tax, Spanish war tax on telephones etc. Supposedly, the "prebate" lowers the effective tax burden on lower income families, down to an effective federal tax burden of 0% on necessities.

The Fair Tax has detractors as well, who argue that it is a waste of time because it won't work as planned or, more commonly, because it is politically undoable and hence a waste of time.

What has been the experience with VAT in the UK is that poor and rich alike pay taxes at the point of purchase. But with the poor consuming necessities the same as the rich, the tax paid on these necessities is a much bigger proportion of their income/savings than the same thing paid by the rich. Perhaps it's a bigger chunk in absolute terms as well as the rich can afford to buy a large amount in one go, and sellers are willing to offer discounts if they get their money in one large chunk, whereas the poor need to stagger their purchases which thus precludes discounts. And as for the consumption tax replacing all taxes, the poor have a much lower base rate anyway, and it still hardly helps them cope with price rises.

Just about the best thing that's happened with VAT is the free rein to tax whatever the government likes on consumer drugs like tobacco, alcohol, etc. The most sensible thing they can do is legalise and add cannabis and other currently prohibited stuff to it. Politically impossible though alas.

[HoreTore]

Ideally and theoretically, I like the idea of a consumption tax as the main form of taxation.

However, I fear it will be eaten alive by the iron law of unintended consequences the minute it hits reality, and so I don't really consider more than a supplement to other taxation...