That won't work. Watch the trends in the states regarding "streamlined" sales tax to see the problem (ok, maybe it's "streamlined" for legislators because they don't define tax categories). Also I have done enough sales tax compliance work in other countries to have stories you won't believe.

For example this one is pre-HST in Ontario, CA and so I don't know if it changed when HST was accepted, but before HST, the question of whether provincial sales tax (PST) was applied to a muffin you buy at a coffee shop depended on what else you purchased and some other factors. The rules were as follows:

If the muffin is not individually wrapped and you buy fewer than six then it is taxable if and only if the subtotal of the muffin and any other prepared foods and beverages purchased is greater than $4 Canadian.

On the other hand, if the muffin is individually wrapped, then it is always subject to PST.... unless the customer also purchases another item of prepared food or drink and the subtotal is less than $4 Canadian.

Here's the problem as I see it:

We all have to file income taxes. Only businesses have to file VAT. What this means in political terms is that if you annoy the population enough regarding filing, they will vote out folks in office and vote in people promising to simplify things (see Reagan-era income tax simplification).

On the other VAT and sales tax are only reported by businesses. You still have all the incentives to make policy by controlling tax rates. However most people don't fill out the returns. Moreover big businesses can afford to do whatever they need to in order to fill out the returns, but smaller businesses will struggle. I will say that in my experience very few small brick-and-mortar businesses that do delivery of goods even make any attempt at being compliant with "streamlined" sales tax laws (where typically you have to report per tax jurisdiction goods are delivered to). Consequently it becomes another formal barrier to entry, another regulation that small businesses ignore because they have to, and another one that allows governments to adopt a "show me the man and I'll find you the crime" approach.

Sales taxes tend towards greater complexity than personal income taxes.

Additionally if you mandate that VAT is built into the prices, you create a perfect way of hiding that complexity from the average voter.

Hence I see that as a very, very bad idea.

You seem to be saying that, with VAT, the devil is in the details, not that it is necessarily bad. The fact that many countries use a VAT, and it works fine (with much higher compliance than income taxes, e.g.), suggests that it's possible to implement VATs better.

Note that a VAT works differently from a sales tax, in that the retailer is strongly motivated to comply, because they get a refund for everything they have paid for the incoming goods.

Economists do widely (universally?) agree that VATs have the lowest inefficiency (deadweight loss) of any form of taxation, and are thus the most efficient (not necessarily most fair, which isn't an economic question. You can solve a lot of the fairness/regressivity issues with VAT through some kind of blanket, potentially refundable per capita credit).

I dislike VATs philosophically due to the massive data they collect and turn over to the government, and how they open up a lot of activities to regulation, but in practice, they do seem to be a superior option.

I don't think that is fair.

Inheritance tax should be 100%. Why should a person be rich just because their parents were rich? What about the people without rich parents?

How about:

The only taxes are:

1) VAT X%

2) 100% inheritance tax.

3) No capital or dividend tax.

4) A "basic salary" of a fixed X dollars to every individual.

5) Inflation of 1-3% a year via increase in monetary supply. (This is the wealth tax).

1. X depends on how much energy consumed for product/service; this is the carbon tax.

2. If you don't want to give all your money to the government when you die - just donate it to a charity not related to any of your relatives. Your children will not be left with nothing. See 4.

3. Encourages people to work and save for passive income for a better than minimum living conditions, as there will not always be jobs available.

4. The salary should be the bare minimum to live on. This takes care of social welfare. It'll be needed as technology increases and unskilled people have no ability to find jobs.

I am against inheritance taxes because they privilege corporate ownership above individual ownership. Corporations never die, so they never have to pay these taxes. Small family farmers OTOH... well they will be extinct under such a plan within a generation or two.

What I'd like to see is a 100% exemption from inheritance taxes for productive land and property (family owned businesses, business assets, office space for family or individually owned business and land contained thereon, farmland, etc), and a tax on income derived from renting out land and housing (this is designed to make it harder to make money from buying up housing to rent, and thus tilting the balance towards home ownership rather than renting). It would also help tilt the balance from corporate ownership to individual ownership of productive assets.

" Corporations never die, so they never have to pay these taxes. Small family farmers OTOH... well they will be extinct under such a plan within a generation or two."

Good point, didn't think of that.

Instead of complex rules about what assets are exempt, I'd favor just a significant blanket exemption sufficient to cover small-time farmers and small businessmen. Say, no inheritance tax on the first $10m in assets, a small rate on $10m-$100m, and quite high rates thereafter. And eliminate all these shenanigans with trusts.

My rule is simple. If you can show that the property is tied to producing things either for a sole proprietorship or a family-run business (in any form), then it's exempt. I don't think the burden of proof needs to be very high. The key thing though is that mere rental businesses would not be. Land, capital, and means of production employed in production would be.

> Why should a person be rich just because their parents were rich?

That's the problem with many policies and tax schemes. Their goal is not to make us better off but to manipulate or enforce someone's vision of fairness, often just thinly disguised envy.

Which in turn leads to all kinds of exceptions for politicians' pet projects, tax breaks for selected industries and just plain corruption.

Also, inflation is a wealth tax only on those whose wealth is in dollars.

I have much sympathy with the argument that inheritance tax should be 100% because rich parents shouldn't confer an entitlement to wealth. But it seems to me that this simply wouldn't work because (1) people will be very strongly motivated to get around it (because "help your children" is a really, really strong human drive and presumably always will be) and (2) it will be very hard to make that very difficult (because, e.g., it means you have to impose severe restrictions on gifts, you might have to have retroactive confiscation of gifts years after they're given if the giver dies, etc. And because it really can't be that hard to conceal part of your estate, or find indirect ways to benefit your children, if you're strongly enough motivated to do so).

I think it's almost certain that the effect of trying to impose a 100% inheritance tax would be that the rich-and-dishonest would find ways to get around most of it, and the poor-and-honest would get screwed even worse than they already do.

I think some of those problems could be mitigated if we focused less on relatively low levels of wealth, and more on very large ones. To me, the fact that someone can inherit $10m and live a life of leisure without working for it is sort of meh, I guess it's not fair in a sense, but it's difficult to do much about, as you say, and overall is not a huge problem.

On the other hand, someone inheriting $10b can do more than just live a life of leisure: that kind of multi-generational concentration of wealth significantly changes societies, producing quasi-aristocratic families that have oversized influence, and really damaging any sort of pretense to an egalitarian society with a level playing field (something Thomas Jefferson, for example, was very worried about).

So imo inheritance taxes should be mostly aimed at very large fortunes and trusts, stuff in the $100m+ range, not $5m inheritances. Other benefits are that a large exemption would avoid causing problems for inheritance of family businesses, and greatly reduce the number of people affected (which in turn should reduce administrative expenses).

I agree that inheritance is bad (for society AND for the recipients), but I think a lot of the issue could be addressed through social pressure to donate much of a fortune past a certain level on death (or irrevocably donate it while alive, retaining control, as a trust). Failing that, a 25-50% inheritance tax probably works, although without the free step up in basis in the current code.

Welfare is important, but I'm treating it as a separate issue here.

Beyond the issue of privileging corporations, a 100% inheritance tax leads to a bunch of strange behavior (with trusts, etc.), and doesn't handle well the possibility of people living a very, very long time.

By taxing wealth at 2% yearly, in combination with inflation, irresponsible/prodigal children will soon be out of money if they don't create value with their assets.

Furthermore, by using inflation as the "wealth tax", people are motivated to put their money into assets that match inflation (e.g. real estate) without necessarily making productive use of those assets.

Communism, Limited Edition, 2.0

Make any tax 100% and nobody will pay it. Tax is not a penalty for being rich (or whatever).