Sales taxes are regressive and affect the poorest the most. Income taxes (can be) progressive.

Progressive taxation benefits society at large.

> Progressive taxation benefits society at large...

... claim the poor and the people who make their money off capital gains.

Who gets to decide what "good for society" means in context of taxation is possibly the most political question out there. It is not at all obvious that making the most productive people pay most of the burden gets to the best outcome.

Being highly paid or at the top of a management structure does not equal being more productive.

It is one philosophy that there exists some line, some fuzzy DMZ that gets crossed between being merely "wealthy and more prosperous than others" and obscene. Colloquially that seems to be "billionaire" but I bet a lot of people on the farther-left would define is somewhere north of $10 million.

Especially in a country so far behind the rest of the developed world with regards to access to health-care and housing for so many millions of people.

Billionaires don't generally pay progressive income taxes. They're part of the 'money off capital gains' crowd.

the more people's lives you are affecting in a positive sense the more likely it is you are making a very high income.

the opposite arrow is not necessarily true, but one wonders if there isn't a 'baby with the bathwater' effect with progressive taxation.

As OSS dev this very often not true for instance: there is a lot of OSS having a positive effect on a huge amount of people and yet the authors scraping by. Paying for OSS should be a tax write off aka charity. Would stimulate more people to just open source it all.

You assume that the value in this case is created merely by its existence but software in a vacuum is worthless. The value in software is also created by orgs that choose to use the software, by distribution networks. It must be reduced to practice.

As a software dev that can be a hard pill to swallow.

Yes, agreed. But does that change the case?

Yes? I am asserting that you are overestimating the value of the programmer, which is one axis of the correlation I suggest.

This is alleviated with a probate and has been studied in depth ala the FairTax. It's FUD and is holding us back.

Not to mention there are many efficiencies that come with this system which would likely cause prices to even out over time near their current levels or just slightly higher.

I figure you can make them progressive by taxing luxury items and not necessities. Obviously there’s a ton of gray area but it could still help a lot.

Sales taxes can be done in a progressive way if you calculate total purchases for the year as (reported income minus reported money added to savings).

Though, of course, you then need even more reporting than we already have, but it would have the upside of no longer disincentivizing work like the current system does, and rewarding savings over spending too.

Not sure why I got downvoted; while it's not super well-known, this is a real and potentially feasible idea that has been studied by economists and has had papers written about it. You can absolutely apply tax brackets to sales tax to avoid making it a regressive tax, it's just a little bit more administratively complex.

There are a number of reasons for your downvotes. For starters, income taxes don't disincentive work and are in fact lower now than they were during our greatest periods of economic growth.

And from the perspective of someone who actually works in tax: the "FairTax" simply pushes all the complexity to everyday transactions, instead of minimizing it to periodic transactions occurring 1-2 times a month (with reporting once a year). It would hugely disincentive paying for actual things, and artificially incentivize (untaxed) services over (heavily taxed) goods.

Moreover, the "FairTax" rate would be 30% or more on all purchases. Not only would the FairTax would obscenely regressive in effect, but a tax rate that large would push a substantial portion of the economy underground!

There's so much wrong with "FairTax" that it should be called "Ridiculous Tax."

> income taxes don't disincentive work

While I agree with much of your post, current taxes on income (featuring reduced taxes on capital income, exclusion of most income from gifts/inheritances, and supplemental taxes on labor income [“payroll tax”]) absolutely disincentivize working for income if you have choices of how to get income. Now, lots of people don't have choices and are stuck with work, but that doesn't mean there is no disincentive effect.

(Of course, “treat income as income” makes this much fairer than the status quo, much less the laughably misnamed “FairTax”.)

All of those alternative sources of money require an individual to already be quite wealthy: capital income means capital assets; gifts/inheritances means wealthy family. At that point...it honestly doesn't matter how you get your money. Over my career I have provided tax consulting and compliance services to many HNW individuals, and income taxes were never once a disincentive to working. A person rich enough to choose how they earn their income works because they choose to.

(Note: payroll taxes such as FICA, etc., actually phase out pretty quickly after $100k in earnings, so they're regressive in nature. There is the high-wage supplemental tax, but this is offset by the cap on income subject to SSI tax, so workers earnings more than $140k actually pay less in payroll tax.)

That being said, I agree that capital gains should be treated as regular income (as it was historically, pre-Reagan) and that income received via gift/inheritance should not receive a FMV cost basis.

That is probably different than the incorrect argument I've often heard, that "if I get paid more and move into a new tax bracket, I'll net less money" which shows up when someone doesn't understand the concept of taxation on marginal dollars.

I think the people who argue for higher taxes on wealthier brackets also argue for capital gains to be taxed at a similar/equal rate to income.

Right, exactly. And besides the examples you mentioned, the differing income tax brackets on married couples is also a big example of this. If only one spouse is working, and the second spouse is deciding whether to get a job, then having all of the second spouse's income taxed at a higher marginal rate from the get go can easily influence people's decisions.

Note: for married couples, the tax bracket thresholds are doubled, except for the highest (37%) bracket, which kicks in for couples making more than roughly $625k but for singles at roughly $520k.

The actual effect is that you need to actually have a huge wealth disparity between partners' earnings for the so-called marriage penalty to kick-in. Fox News notwithstanding, the overwhelming majority of married couples will not see a marriage penalty.

All true, and good points. However the marriage bonus for single earners is much greater than the bonus for double earners, so if you look at it from a certain angle there is sort of a penalty for dual earners vs sole breadwinner marriages.

Denmark and Sweden have VAT rates of 25%, so it's not nearly as unrealistic as you make it out to be.

I think you're making some incorrect political assumptions about my views. I have no idea what this "FairTax" thing is that you're referring to, but that sounds like something pretty different from what I'm talking about.

Your parent comment described one of the proposed ways for implementing the FairTax system, in which a national sales tax would replace the national income tax.

Even if you did not mean to suggest FairTax and you mean something very different, your proposal still ends up being significantly more complicated than an income tax, since now taxpayers must track all purchases made over the year rather than the relatively limited sources of income they have. Your proposal would increase the compliance burden on buyers, sellers, and the government.

No, my comment said calculate total purchases for the year as (reported income minus reported money added to savings) which specifically does not require tracking any purchases, only income and contributions to bank/investment/retirement accounts and such.

By not tracking purchases individually, and only inferring the total amount of money spent by subtracting savings from income, you can also apply brackets to purchases, and thus avoid the regressive nature of a "simple" flat sales tax.

I don't think this would be a good idea for fairness reasons, but assuming you'd implement it this way: How would you collect sales tax if you allow completely anonymous transactions? This is already a problem with cash, it would become a bigger problem if you introduce more convenient alternatives to cash in the form of crypto.

It's a lot easier to require businesses in the country to report sales tax (of which the infrastructure is already in place and could be funded more heavily) than it is to go after individuals. Even if the business' individual transactions are in cash or anonymous.

There will always be a black market, but eventually that money has to flow back into the regular economy (food, housing, etc...) and will be taxed.

It could be done anonymously if you calculate purchases implicitly as income minus savings. This would de-anonymize savings of course, but they’re not really that anonymous right now anyway since most methods of savings have to report interest/dividends/etc.

And then you're back to where you started, surely? You still need the information about income.

Right, but the problem cited earlier up in the thread is that sales tax would prevent anonymous purchases; if you accept that income is not anonymous (which it already isn't), then you can still have a system with both sales tax and anonymous purchases.

Income: unknown due to financial privacy

Savings: unknown (held in cryptocurrency, private)

Tax: divide by zero error

Besides, doesn't the US already have sales taxes? Or are they state-only? I'm starting to favor a tax on real estate and/or land value, since that's physically impossible to hide.

> Besides, doesn't the US already have sales taxes? Or are they state-only?

State. City. County. Sub-divisions of same that are special sales tax districts and have extra sales tax applied. Not every instance of those entities applies a sales tax, but any could and many do. Basically everything except federal. The sales tax where I am, in a "red" state, is about 11% (we actually have a really high effective all-inclusive tax rate in this state, for how entirely shitty government services and infrastructure are)

> I'm starting to favor a tax on real estate and/or land value, since that's physically impossible to hide.

The challenge with that is the system for assigning value—everything else about it is easy. We already have something close to what you'd need in the US because real estate property taxes are common. That system's not perfect but it may still be good-enough, despite its flaws. It seems to work kinda OK. That might change if that became a more important revenue source, and for more levels of government, though.