How do we fix the economy???

Good! We agree! Government legally owns all our income but faces real limits on how much it can take possession of.

gcomeau wrote:

PeterZ wrote:Can government raise income taxes to 100%? Yes? Then they own our income.

No they do not. That's like saying "could I buy that car? Yes I could. Oh then I already own it!"

If they DID raise every single income tax bracket to 100% then in that ridiculous hypothetical fantasy world they would own all income. Here in reality however they own exact the percentage the tax rate is set at. No more and no less. So says the law, that thing that society uses to lay out the rules of ownership among other things.

PeterZ wrote:Good! We agree! Government legally owns all our income but faces real limits on how much it can take possession of.

I said exactly the opposite of that, so no we do not agree.

They own what the law says they own, and the law sure as hell does not say that that is 100% of your income.

They have the authority to change the law and legally raise the tax rate to 100%. You agreed they had that authority. You agreed that using that authority has real life limits. So your prior post accepted that Congress could raise the rate to 100% if those real life limits are overcome.

So we agree.

gcomeau wrote:

PeterZ wrote:Good! We agree! Government legally owns all our income but faces real limits on how much it can take possession of.

I said exactly the opposite of that, so no we do not agree.

They own what the law says they own, and the law sure as hell does not say that that is 100% of your income.

PeterZ wrote:They have the authority to change the law and legally raise the tax rate to 100%. You agreed they had that authority. You agreed that using that authority has real life limits. So your prior post accepted that Congress could raise the rate to 100% if those real life limits are overcome.

So we agree.

In a representative democracy the elected government has the power to levy taxes. Yes.

One. More. Time.

Saying they could hypothetically lay claim to all income by setting a 100% tax rate is in NO WAY EQUIVALENT to saying they currently already own all income.

They would only own all income AFTER they set the rate to 100%. And it would be a very brief ownership... say until the very next election if not sooner.

Which is another reason sales taxes are better than income taxes. Repeal the 16th Amendment and rely on sales taxes. Remove that lingering authority to take possession of America's income. Heck, that's your best tool to turn this country into your socialist utopia.

gcomeau wrote:

PeterZ wrote:They have the authority to change the law and legally raise the tax rate to 100%. You agreed they had that authority. You agreed that using that authority has real life limits. So your prior post accepted that Congress could raise the rate to 100% if those real life limits are overcome.

So we agree.

In a representative democracy the elected government has the power to levy taxes. Yes.

One. More. Time.

Saying they could hypothetically lay claim to all income by setting a 100% tax rate is in NO WAY EQUIVALENT to saying they currently already own all income.

They would only own all income AFTER they set the rate to 100%. And it would be a very brief ownership... say until the very next election if not sooner.

Problem with sales tax is it tends not to count sales that are predominantly made by the rich.
Ie: shares etc.
With high end financial products not being subject to a sales tax, but instead corpirate or income tax, tax avoidance becomes simpler.

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PeterZ wrote:Which is another reason sales taxes are better than income taxes. Repeal the 16th Amendment and rely on sales taxes. Remove that lingering authority to take possession of America's income.

As already pointed out, there is no meaningful conceptual difference between an ability to take possession of revenue at the point it is paid for labor and an ability to take possession of revenue at the point it is paid for goods and services. It's the same money, and they're still taking just as much of it if the idea is to collect sufficient taxes to fund the budget. The only difference is who they're taking it from.

With a sales tax, they're taking a lot more of it from the poor and accelerating wealth inequality which destabilizes society. (Or, if you exempt the poor from the sales tax, the government is likely not taking in enough revenue at all and your nation is quickly heading into crushing debt)

Not to mention sales taxes de-motivate spending. The economy needs spending. So sales taxes drive down economic growth to a FAR greater degree than income taxes (You cannot make more money by earning less to avoid paying more income taxes. You CAN make more money by spending less to avoid paying more sales taxes assuming you have the luxury of not spending)

So no, not better than income tax.

Heck, that's your best tool to turn this country into your socialist utopia.

First, I have no idea what you're talking about when you refer to "my" socialist utopia. But I can almost guarantee from what you are saying that you have no idea what my idea of a well run government and economy looks like.


Second, I have absolutely no idea how a sales tax would turn a nation into ANYONE'S "socialist utopia". You have certainly not outlined any means by which that would happen during this discussion.

Might have projected a bit based on your preference for Sanders.

Not sure how the demand curve will look when comparing higher incomes to higher prices. Demand is defined by both the ability and desire to pay a given price. No income taxes means a greater ability to pay higher prices ceteris paribus. Also, no corporate income taxes means lower prices. So long as no VAT is added, after tax prices would remain about the same. Heck, even a modest after tax price increase would still generate more activity based the increased income.

PeterZ wrote:Might have projected a bit based on your preference for Sanders.

Not sure how the demand curve will look when comparing higher incomes to higher prices. Demand is defined by both the ability and desire to pay a given price. No income taxes means a greater ability to pay higher prices ceteris paribus. Also, no corporate income taxes means lower prices. So long as no VAT is added, after tax prices would remain about the same. Heck, even a modest after tax price increase would still generate more activity based the increased income.

That is all heavily dependent on what sales tax rate replaces what income tax rate. Assuming we're going for a rate that will be revenue neutral relative to the current income tax rate you are either going to:


A: Gut the poor (and seniors... the retired tend to have little to no income and are living off savings which will now suddenly not be going nearly as far).

B: Exempt the poor (and assuredly seniors)from the tax somehow, requiring a significantly higher sales tax rate on everyone else to make up the difference, which will probably mean consumption of essentials like food and the like may remain level or rise a bit since those are the things the poor will be spending on and they might be able to do it more but sales of other goods will take a serious hit if you want to put the rate high enough to make up all that lost revenue.


It's hard to say exactly how high a sales tax rate you would actually need, but it's a lot higher than most sales tax proponents tend to assume (or in some cases, just tend to claim while probably knowing better). A Brookings researcher took a look at it back in 1999 trying to calculate what you would need in order to maintain revenue levels produced by the income tax system and found problems, to say the least. (This analysis includes factoring in exemptions for the poor, which further drives up the rate for everyone else)

http://www.brookings.edu/~/media/resear ... 199909.pdf


"My estimates show that holding the real size of government constant in the AFT proposal would require a 35 percent tax-inclusive sales tax rate, or a 53 percent “mark-up” at the cash
register, even if there is no base erosion, avoidance, or evasion. If, in addition, one makes what I view as conservative, but realistic, assumptions about statutory base erosion, avoidance and evasion--stipulating that each factor would be positive, but smaller in the NRST than it is in the
existing system-- the required tax-inclusive tax rate in the AFT proposal would be over 50 percent and the required tax-exclusive tax rate would be over 100 percent. The required tax exclusive rate in the S-T proposal would be about 60 percent as high. "

100% + sales taxes sound like they're going to go over well to you?

I lost the work I was doing on this response. Bother!

Long and the short of it is that with a world equities market totaling between 80tr-100tr in market cap and the amounts being traded annually approximates between 75%-150% of world GWP and approximately 35% of those equities reside in the US, charging 5% of the purchase price per transaction will net a good deal of tax revenue.

If we assume for this discussion that the US will $34 trillion traded in the year, that's 3.4 trillion in transaction tax. 5% paid by the buyer and 5% paid by the seller. Further assume that new issuances represent 10% and the same transaction tax is applied. This generates another $.17tr

US Bond market is approximately $40tr (as of 2014) and growing. Weighted average maturity is 5.6 years implying that $7tr mature every year. Further assume than 10% are traded annually. Applying a 5% transaction cost to that traded $4tr amounts to $400bn, again 5% to buyers and 5% to sellers. Applying that 5% to the new issuances generates $350bn.

Total retail sales is 5.2tr in 2014 and grew 28% in the last 5 years, but let's keep this number for this discussion.

Now in 2014 total income tax, payroll tax and sales tax revenue for Federal, States and localities. was $5.1tr out of a total tax revenues of $6.1tr. If we set the total sales tax at 20% for all jurisdictions, we get sales tax revenues of $1tr.

Back of the napkin math suggests that $1tr for sales tax, $5.1tr for equities transactions and $750bn for bonds transactions generates $5.32tr total tax revenues. That compares to the total $5.1tr generated by the income tax and sales tax for all levels of government.

As you can see there is wiggle room on the rates assessed. The guiding principle is both morally superior and practically more consistent with the services government provides than an income tax. Taxes are assessed when someone engages in a voluntary action and the government gets paid for securing those transactions. There is a built in incentive to move money to the US to avoid income taxes on capital gains. This is offset somewhat by the higher cost of transactions. Odds are that stock and bond transactions will slow down per given level of market capitalization, while more assets will move into the US increasing the market cap of equities domiciled here. Not sure of that will all washout or what. I will say that it can work as the rates are adjusted to optimize revenue and or reach a revenue target.