That's not true. Here's just one example: fine-grained taxes are used to help influence behavior, improving public health. Mexico increased taxes on sugar [0], with the result being a fall in consumption. Raising this tax has caused a verifiable reduction in consumption, which has a direct impact on public health[1]. That's just one example, many more exist for all sorts of reasons. It's why cigarettes and alcohol are taxed differently than broccoli. Obviously not all taxes are in the public interest, but neither are they just to give some government official a feeling of empowerment.

[0] https://www.theguardian.com/society/2017/feb/22/mexico-sugar...

[1] http://journals.plos.org/plosone/article?id=10.1371/journal....

Many people believe this is an overstep on the government's part. These people believe it's not the government's job to be paternalistic and nudge people into the "right direction".

This is based on the complete abhorrence of "scope creep" mixed with near total surveillance and control over the use of force. Those with that much power should not be able to enforce social mores, even if they reflect the will of the people at the time.

What if we frame it as a financial problem, not a well-being problem. Argument: it is in everyone's best interest if fewer people smoke. Smoking overwhelmingly affects poorer citizens who are already more reliant on social services. And since effects are tied to age, older smokers will more heavily put a burden on both the healthcare system as well as the entire insurance market (including Medicare/ Medicaid). Ergo it is in everyones best interest to disincentivize as many people from smoking as possible. Raising a tax on cigarettes is a cheap, quick, and effective means to do so, while raising funds for the very same health services they are likely to be using in the future.

Give people social services, and now you own them and have the right to control their life.

Ah so that's why in the US you get health insurance from your employer!

/s

However in a democracy those people are merely one constituency among the electorate, the rest of whom like to have things like police forces, emergency response services, shared infrastructure such as road networks, enforced assurances of the quality of consumer goods and services and many other things that a well funded government can provide. Unfortunately that funding has to come from somewhere and making choices about where the funds come from requires making judgements on such things.

>Those with that much power should not be able to enforce social mores, even if they reflect the will of the people at the time.

What else are laws for?

Sugar consumption isn't contagious. I would call that an improvement to private health.

Your ultra simplistic idea has been tried before to some extent. It doesn't work.

VAT is a trivial tax to avoid since it involves the business letting the tax department know how much tax they collected. So what happens is that they under report either (a) by flat out lying or (b) doing more business in cash or through a barter system.

Also it is incredibly regressive rewarding the rich (who are generally hoarding money not spending) and punishing the poor (who spend a larger portion of their wealth on consumable spending which is subject to VAT).

That's why many countries have a VAT but none of them solely rely on it.

Many countries have multiple VAT rates for different goods. Staple food and other basic goods, which constitute a larger part of a poor person's spending, are in lower rates.

And the rates used to be - by today's numbers - ridiculously low, but over time it became a nice and succulent teat to milk.

Given your comments, we seem to be similarly minded. What do you think about a wealth tax? To me, that would be the most appropriate given that incomes can vary year to year. Corporate taxes are a separate matter altogether, IMO, since corps just include their tax burden in the price of the products.

edit: What I'm thinking is some sort of total asset valuation placing one in a given bracket, rather than income level. While income tax is income tax, regardless of short-term/long-term capital gains (35%/15%, USA), or salary.

How well would that apply to assets that are hard to measure the value of? Ie a house, a business or a painting even. I think it would encourage a system where people somehow minimize what their assets appear to be worth - or how well they can be measured.

Given how Prop 13 was enacted to not push existing homeowners out of their homes if their property values increased significantly, would there be a similar push under such a system?

That would be a horrendously regressive taxation system.

"Fine-grain taxes" are what let a government tax people equivalently to their ability to pay. Income tax being one of the easiest ways to do that...

That’ll work great if every nation simultaneously agrees to it, but is potentially catastrophic if they don’t: all the tax-dodgers move to your country for tax purposes while continuing to make and sell everything else exactly as before.

And if every nation agreed to have identical tax laws, we wouldn’t have a problem with lawful multinational tax minimisation in the first place, because there would be no advantage to it.

Sounds good. It forces all countries to unify VAT.

It begs the question why it does not happen already?

It forces them to unify everything except VAT (and land tax). Or, and I only realised this just now, do something complicated with imports, customs, and how to handle cross-border sales of digital goods (the EU does this, but it is a mess).

If I had to guess, I’d suggest haven’t already done what you suggest for at least one of these reasons:

1) because it’s economic mutually assured destruction

2) because tax codes are long and complicated (and sometimes deliberately written as political favours), and they’re as afraid of touching it as PayPal are of touching whatever Musk wrote 20 years ago.

3) because businesses that have revenue (Apple, $229bn) comparable to the GDP of the nations whose tax systems they are exploiting (Ireland, $293bn; Luxembourg, $59bn) is novel and governments are slow to adapt.

I don't know for sure, but is it appropriate to use gross GDP numbers instead of GDP/capita? When one is choosing which metrics to use, bias is introduced.

Depends what you’re comparing. Gross economic force of two entities? Raw GDP; Quality of life? GDP-PPP/capita is better.

Private citizens don’t generally get to threaten governments by moving abroad to withold their taxes — and even when they do (I kinda am!) it’s so completely irrelevant it isn’t worth the government’s time to bother to check if it’s actually happening or just a loudmouth blowing off steam by saying they will.

To an extent it already has in the EU in which every country is required to impose a VAT compliant with EU rules, although they have some leeway on the rates and goods covered.

On the other hand, there are countries out there that do very well out of having tax codes that wouldn't work for big industrialized countries, or countries part of a big unified trading bloc. They have strong incentives to keep their tax codes the way they are.

I'm American, and thus not terribly familiar with the details of VAT. Is there anything about how it works that makes it less regressive than a simple sales tax? Sales tax as it exists in most US states is just about the most regressive tax scheme imaginable.

The only difference between sales tax and VAT is that VAT is applied at each stage of the production/sales chain, but only on the incremental value added at each stage, whereas sales tax is applied only at the very end of the chain on the entire value. The advantage of sales tax is that only the retail seller needs to worry about collecting it, and the advantage of VAT is that you don't need rules to figure out which stage along the chain is supposed to be the "final" one. (Consider small businesses buying product from a place like Costco. They either get double-taxed, or have to get some sort of exemption.)

In terms of the actual money collected, the two are the same. An X% tax rate results in the retail buyer paying X% more.

The basic answer is that the progressive European countries primarily funded through VAT are indeed using a regressive taxation system, but countering it with progressive spending.

The US system is a moderately progressive tax system but less progressive spending (not no progressive spending, but not nearly as much).

The argument is that you "buy off" the wealthy interests (both wealthy individuals and corporations) by using a regressive tax system, so they are happier to let you spend the money progressively, while in the US they are constantly fighting any progressive spending, because any tax cut will benefit them greatly.

VAT is also a regressive. It's comparable to sales tax.