this post was submitted on 04 Feb 2024
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A Boring Dystopia
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The thing a consumption tax fixes is eliminating all the tax avoidance schemes. People living off their wealth don't pay high taxes, they take out loans against their wealth and pay the loan back at 5% instead of the 20% capital gains tax. Carl Icahn, an investor was able to pay no income tax using this scheme. He had an adjusted gross income of $544 million but deducted it all from paying his 1.2 billion dollar loan.
That's... why you might want to tax wealth? Sales tax does literally nothing to address the problem of neither wealth nor income inequality. Income tax does address some of it. Removing it just because it doesn't address all of it is absurd. Thinking it is covered by sales tax, is even more so. Those who would be in the lower tax brackets would have less buying power, and those with high incomes would be having a party, well... until the fairly immediate collapse of the economy and the riots start, that is. Just because one aspect doesn't cover everything doesn't mean you remove it all-together and replace it with... well, I'm still curious.
The ways to circumvent paying taxes, is what you go after, but you don't do that by just removing existing obstacles. You do it by adding more obstacles. You can still tax income, and you adjust it to tax the high income earners much more. You evaluate wealth and tax that. You put a tax on absurd inheritances. You limit the profitability of trading necessities (e.g. housing) as goods by also high taxation.
The only thing I objected to in your original comment was to suggest 0% tax on income... and that this is compensated for by increasing sales tax... as if it solves anything at all. Income tax accounts for about 50% of the US federal budget. Tricks to avoid paying income tax are well known, but the idea of not addressing the issue, but instead just "start from scratch", or suggest to remove something fundamental to the function of a modern state, is ... tiresomely American. It's like the Churchill quote of Americans always doing the right thing, after having tried everything else.
Income inequality hasn't been solved by progressive income tax, it's not a magical sacred cow. It's always been flawed.