# Should we tax spending instead of income? **URL:** \ **Category:** Great Debates\ **Created:** [September 24, 2012, 10:26pm UTC](https://boards.straightdope.com/t/should-we-tax-spending-instead-of-income/635720 "2012-09-24T22:26:11Z")\ **Posts on this page:** 20\ **Page:** 3
**Author:** ![Untoward\_Parable](https://avatars.discourse-cdn.com/v4/letter/u/51bf81/32.png) [@Untoward\_Parable](https://boards.straightdope.com/u/Untoward_Parable)\ **Post date:** [September 25, 2012, 8:03pm UTC](https://boards.straightdope.com/t/should-we-tax-spending-instead-of-income/635720/41 "2012-09-25T20:03:53Z")
> [@Damuri\_Ajashi](#): > > A 10% asset tax would be disastrous. Even 1% would be pretty bad. > > If you want to prevent the dynastic accumulation of wealth, we have an app for that. Its called the estate tax. > > Most wealth tax is targetted at passive investments, not the value of a privately held active business. > > But generally speaking, there are better ways to raise revenue equitably. Describe to me the economy where this is disastrous. I have about 200k in assets, may wife and I make about 200k a year. I think we’re doing pretty well but not insanely well. At 10% asset tax we would pay 20k a year in taxes. Not until our assets reached about 600k would this really start to even out even close tot he taxes we pay now, and getting there would be a lot easier. We would probably look at asset hoarding as an actual liability instead of the unmitigated good we see it as now. That would stimulate the economy as others acted with the same pressures in mind. Wages would go up making the total assets holdable without sliding backward even higher. I guess the downside is: no more Paris Hiltons, no more billionaires, easier time for working poor people to get into the middle class and have enough to support their families, easier time for the working middle class to get into the upper classes. Dang that sounds like a real hellscape. ---
**Author:** ![Inigo\_Montoya](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/inigo_montoya/32/124_2.png) [@Inigo\_Montoya](https://boards.straightdope.com/u/Inigo_Montoya)\ **Post date:** [September 25, 2012, 8:08pm UTC](https://boards.straightdope.com/t/should-we-tax-spending-instead-of-income/635720/42 "2012-09-25T20:08:53Z")
> [@emacknight](#): > > That is a very flawed way of looking at it. Most of what the poor are buying with that 100% is rent and food which isn’t typically “taxed” as spending. If the poor then want to buy a tv they have a choice, buy a modest tv, pay almost no tax, and save the rest. Or they can blow their savings on a big tv and pay a tax. … People shouldn’t live paycheck to paycheck, and those that choose to can pay more in taxes than those that don’t. Now granted, you soften this just a little in the remainder of your post but … Really? I have to believe that the majority of people who live paycheck to paycheck are not living beyond their means, they’re just trying to live. \ You’re making some pretty wicked assumptions about folks who don’t earn a very big wage. ---
**Author:** ![emacknight](https://avatars.discourse-cdn.com/v4/letter/e/3ec8ea/32.png) [@emacknight](https://boards.straightdope.com/u/emacknight)\ **Post date:** [September 25, 2012, 8:34pm UTC](https://boards.straightdope.com/t/should-we-tax-spending-instead-of-income/635720/43 "2012-09-25T20:34:34Z")
> [@Damuri\_Ajashi](#): > > Really? It had nothing to do with easy credit and broken market mechanisms? It was because we bought TVs that were too big? It wasn’t the consumer credit market that drove this recession. Are you familiar with the word consumption? People bought houses bigger than they could afford. Then took any equity out of them to spend. People spent. The US had a negative savings rate going into the recession. People foreclosed because they couldn’t cover the difference on their mortgage. Consumer credit was a huge part of the problem because after they defaulted on their homes, and their cars, they defaulted on their credit cards. How is it that you don’t know any of this? > [@Damuri\_Ajashi](#): > > It only encourages less domestic consumption. Whether or not this is better is situational. We could certainly use more domestic consumption in the economy right now. Sure, we could also use more tax revenue. > [@Damuri\_Ajashi](#): > > A lot of people aren’t spending money on 56"TV’s some of them spend a lot of it on food clothing and shelter. And those wouldn’t be taxed, so they wouldn’t end up paying as much of their income in taxes. Isn’t that a good thing? Someone that spends 100% of their income on food clothing and shelter would pay 0% of their income in taxes. The more a person has to spend on extras the more a person pays in taxes. Sounds pretty progressive to me. > [@Damuri\_Ajashi](#): > > I agree that a consumption tax can be progressive but are you suggesting funding our government with what amounts to a luxury tax? Nope, the current level of government spending is way too high. I’m suggesting that it’s a good way for a government to make revenue that allows income taxes to be lower. > [@Damuri\_Ajashi](#): > > They also have an income tax. And a balanced budget, and UHC, and a lower unemployment rate… > [@Damuri\_Ajashi](#): > > Ed McCaffery is a tax lawyer. He has been pushing for a consumption tax for a while. He has yet to explain how we would overcome the transition issue and his numbers on how to make the plan revenue neutral don’t add up. Yup, transition sucks, people get over it. > [@Damuri\_Ajashi](#): > > He also wants to get rid of the estate tax mostly based on ideological grounds (he’s also a trusts and estates lawyer). Anything else about him you feel relevant? > [@Damuri\_Ajashi](#): > > One of his main arguments seems to be that the rich can avoid income taxes by having no income. Well, duh. They can also avoid the consumption tax by earning all their money here and spending it all somewhere else. I assume we’ll still have duty and import laws. Canadians can only do so much cross border shopping. > [@Damuri\_Ajashi](#): > > We will start effectively tax the wealthy when we stop letting the wealthy write our tax laws. Let me know when that happens, doesn’t look like it will be this election cycle, maybe 2016. > [@Damuri\_Ajashi](#): > > The Romney problem isn’t a income versus consumption tax problem. Its mostly a “why the fuck do we tax unearned income at less than half the rate of earned income” Because what you call “unearned income” others call capital gains. Back in 1921 the US government decided to tax capital gains differently than earned income and it’s been that way ever since. Glad we cleared that up. > [@Damuri\_Ajashi](#): > > “why the fuck do we treat the work that hedge fund managers do as unearned income for tax purposes”? Because hedge fund managers make a lot of money for the people who make laws. Remember: > [@Damuri\_Ajashi](#): > > We will start effectively tax the wealthy when we stop letting the wealthy write our tax laws. > [@Damuri\_Ajashi](#): > > Emack, you pop in every once in a while to give us your unique version of economic theory then someone like Hellestal comes along and wipes the floor with you. All your novel ideas turn out to be fatally flawed and yet you keep at it. I have to admire the persistence. Stay classy. ---
**Author:** ![emacknight](https://avatars.discourse-cdn.com/v4/letter/e/3ec8ea/32.png) [@emacknight](https://boards.straightdope.com/u/emacknight)\ **Post date:** [September 25, 2012, 8:44pm UTC](https://boards.straightdope.com/t/should-we-tax-spending-instead-of-income/635720/44 "2012-09-25T20:44:33Z")
> [@Voyager](#): > > Remember the increase in the middle class saving rate at the height of the recession? How did that do for the economy? Damn those middle class people saving money! Spend spend spend! What kind of a fool puts away 6 months living expenses anyway? Don’t they know they are hurting the economy. If they lose their job they can always get a bunch of government money right? ---
**Author:** ![Inigo\_Montoya](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/inigo_montoya/32/124_2.png) [@Inigo\_Montoya](https://boards.straightdope.com/u/Inigo_Montoya)\ **Post date:** [September 25, 2012, 8:46pm UTC](https://boards.straightdope.com/t/should-we-tax-spending-instead-of-income/635720/45 "2012-09-25T20:46:36Z")
Oh…never mind. I get it now. ---
**Author:** ![emacknight](https://avatars.discourse-cdn.com/v4/letter/e/3ec8ea/32.png) [@emacknight](https://boards.straightdope.com/u/emacknight)\ **Post date:** [September 25, 2012, 8:55pm UTC](https://boards.straightdope.com/t/should-we-tax-spending-instead-of-income/635720/46 "2012-09-25T20:55:26Z")
> [@Inigo\_Montoya](#): > > How about taxing net worth. Every year. This would generate stupid amounts of very predictable revenue, some of which can be funnelled into Social Security which can, in turn, be beefed up to provide a living income for retirees who felt forced to spend down their savings to pay taxes, eat, put kids through college, etc. You’d have to make the Social Security payments huge to help old people cover all the tax they’d be paying on all the assets they’ve accumulated. It’s one of the major downsides to property tax. A person’s net worth goes up as they age independently of their income. You’d have people that got laid-off getting hit with massive tax bills. On the other hand, if it discouraged my mother from accumulating so much shit I think it would be a great idea. ---
**Author:** ![Saint\_Cad](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/saint_cad/32/18907_2.png) [@Saint\_Cad](https://boards.straightdope.com/u/Saint_Cad)\ **Post date:** [September 25, 2012, 9:05pm UTC](https://boards.straightdope.com/t/should-we-tax-spending-instead-of-income/635720/47 "2012-09-25T21:05:53Z")
The issue with the rich is that capital gains tax is a lower rate than income tax and most of their income is capital gains. If you were to tax passive capital gains as if it were income, a lot of the income tax disparity becomes a non-issue. ---
**Author:** ![Paranoid\_Randroid](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/paranoid_randroid/32/18_2.png) [@Paranoid\_Randroid](https://boards.straightdope.com/u/Paranoid_Randroid)\ **Post date:** [September 25, 2012, 9:23pm UTC](https://boards.straightdope.com/t/should-we-tax-spending-instead-of-income/635720/48 "2012-09-25T21:23:55Z")
> [@emacknight](#): > > Damn those middle class people saving money! Your tone implies that **Voyager** assigned some kind of moral culpability to non-savers, but that doesn’t appear to be the case. The effect of higher rates of saving on economic recovery is an issue distinct from the blameworthiness of an individual who decides (in this or that instance) to save. Not that I, myself, have any particular insight into this question — I don’t. Nevertheless if it _is_ true that saving is harmful, the remedy wouldn’t be torches and pitchforks, it’d be policies that sway behavior. > [@emacknight](#): > > For those that are dumb enough to think diminishing marginal utility is a reasonable justification for progressive income tax, this is the perfect measure of who has disposable income that they don’t care about. Two people making the same income can be taxed base on how much they value each dollar they earn. The one who doesn’t value it and buys the bigger tv will pay more tax. That argument fails for the same reason that diminishing marginal utility arguments fail: if person A purchases the television and person B does not, you can only conclude that A values the TV more than whatever else person A can afford. You can’t use the purchase to conclude anything about how A values “dollars” relative to B. (Not that anyone besides Scrooge McDuck values dollars per se.) Maybe B hates TV and only ever goes to the movies. (That said, the diminishing marginal utility argument has _something_ going for it, viz. that it’s probably not far off from the truth. It’s undoubtable that $1,000 removed from my bank account would have more of a negative effect on my well-being than the same amount removed from Bill Gates’s. From that realization it’s only a hop, a skip, and a jump to the reasonableness of progressive taxation. IMHO.) ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [September 25, 2012, 9:35pm UTC](https://boards.straightdope.com/t/should-we-tax-spending-instead-of-income/635720/49 "2012-09-25T21:35:09Z")
> [@emacknight](#): > > Damn those middle class people saving money! Spend spend spend! What kind of a fool puts away 6 months living expenses anyway? Don’t they know they are hurting the economy. If they lose their job they can always get a bunch of government money right? I wasn’t criticizing them. I was just pointing out that their reducing spending - perfectly reasonable - hurt the economy. Do you deny that? And, as I said above, the root cause of the calamity was people trying to spend (and being encouraged by the government to do so) while their income stagnated due to a number of reasons, including a frozen minimum wage and union busting. And the bad loans you object to were pushed by banks to enable high interest mortgage debt to sell. Around here the banks were advertising home equity loans on the radio every few minutes. Anyhow, thanks for admitting that your support of the consumption tax is not to have a fairer tax, but to have a reduced tax to starve the beast. And speaking of starving, those on food stamps will surely thank you. Typical voodoo economics - we cut the tax on the poor, set things up so that we cut the tax on the rich, don’t increase the tax on the middle class, and wind up with the same amount of money. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [September 25, 2012, 9:42pm UTC](https://boards.straightdope.com/t/should-we-tax-spending-instead-of-income/635720/50 "2012-09-25T21:42:13Z")
> [@Paranoid\_Randroid](#): > > Your tone implies that **Voyager** assigned some kind of moral culpability to non-savers, but that doesn’t appear to be the case. The effect of higher rates of saving on economic recovery is an issue distinct from the blameworthiness of an individual who decides (in this or that instance) to save. Not that I, myself, have any particular insight into this question — I don’t. Nevertheless if it _is_ true that saving is harmful, the remedy wouldn’t be torches and pitchforks, it’d be policies that sway behavior. Absolutely correct. > [@](#): > > That argument fails for the same reason that diminishing marginal utility arguments fail: if person A purchases the television and person B does not, you can only conclude that A values the TV more than whatever else person A can afford. You can’t use the purchase to conclude anything about how A values “dollars” relative to B. (Not that anyone besides Scrooge McDuck values dollars per se.) Maybe B hates TV and only ever goes to the movies. > > (That said, the diminishing marginal utility argument has _something_ going for it, viz. that it’s probably not far off from the truth. It’s undoubtable that $1,000 removed from my bank account would have more of a negative effect on my well-being than the same amount removed from Bill Gates’s. From that realization it’s only a hop, a skip, and a jump to the reasonableness of progressive taxation. IMHO.) Marginal utility has to be summed over purchases. The classic example is that your first ice cream cone has more utility than your fifth. In your example, a guy might value a tv highly, but he won’t value a fifth TV nearly as highly (no matter what the cable ads who seem to think people have TVs in every room will tell you.) The second guy won’t value his tenth movie of the week nearly as highly as the first. Money is just a counter in this case. Mrs. Marcos clearly had low marginal utility for money, since her thousandth pair of shoes can’t be worth as much as her first, even for her. The utility there is having them, not using them, just like the guy who has 20 cars. ---
**Author:** ![TriPolar](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/tripolar/32/3008_2.png) [@TriPolar](https://boards.straightdope.com/u/TriPolar)\ **Post date:** [September 25, 2012, 9:52pm UTC](https://boards.straightdope.com/t/should-we-tax-spending-instead-of-income/635720/51 "2012-09-25T21:52:58Z")
A sales tax would work wonderfully if it it included all sales. All, as in sales of property, stocks, and other financial instruments. That will never happen so instead a consumption tax is offered. Since the vast majority of people consume the majority of their income they’ll bear the brunt of taxation while those who need only to consume a miniscule portion of their income, and can write off a large portion of what they do consume, will pay very little. So it’s a dumb idea. And since it’s a dumb idea we’ll probably end up doing it some day. ---
**Author:** ![amarone](https://avatars.discourse-cdn.com/v4/letter/a/e0b2c6/32.png) [@amarone](https://boards.straightdope.com/u/amarone)\ **Post date:** [September 25, 2012, 9:53pm UTC](https://boards.straightdope.com/t/should-we-tax-spending-instead-of-income/635720/52 "2012-09-25T21:53:26Z")
> [@Untoward\_Parable](#): > > Describe to me the economy where this is disastrous. I have about 200k in assets, may wife and I make about 200k a year. I think we’re doing pretty well but not insanely well. At 10% asset tax we would pay 20k a year in taxes. Not until our assets reached about 600k would this really start to even out even close tot he taxes we pay now, and getting there would be a lot easier. We would probably look at asset hoarding as an actual liability instead of the unmitigated good we see it as now. That would stimulate the economy as others acted with the same pressures in mind. Wages would go up making the total assets holdable without sliding backward even higher. And as you approach retirement and have $2m in assets, you are hoping to get about 6% income from that - 3% to offset inflation and 3% to spend (or spend a bit more if prepared to draw down capital). Unfortunately, you have to pay 10% asset tax, which way exceeds the growth, and hence your retirement savings now diminish rapidly. Your “asset tax” is a “screw retirees tax”. ---
**Author:** ![Paranoid\_Randroid](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/paranoid_randroid/32/18_2.png) [@Paranoid\_Randroid](https://boards.straightdope.com/u/Paranoid_Randroid)\ **Post date:** [September 25, 2012, 10:02pm UTC](https://boards.straightdope.com/t/should-we-tax-spending-instead-of-income/635720/53 "2012-09-25T22:02:07Z")
> [@Voyager](#): > > In your example, a guy might value a tv highly, but he won’t value a fifth TV nearly as highly (no matter what the cable ads who seem to think people have TVs in every room will tell you.) The second guy won’t value his tenth movie of the week nearly as highly as the first. Yes. The point here, though, is that the subjective valuations between persons A and B are strictly speaking incomparable. Person A won’t value his fifth TV as much as his fourth, but that doesn’t mean that he values his fifth TV — or his thirtieth — more or less than B values _her_ first. I do think that this doesn’t give us the whole story (see the “strictly speaking” clause). ---
**Author:** ![Untoward\_Parable](https://avatars.discourse-cdn.com/v4/letter/u/51bf81/32.png) [@Untoward\_Parable](https://boards.straightdope.com/u/Untoward_Parable)\ **Post date:** [September 25, 2012, 10:21pm UTC](https://boards.straightdope.com/t/should-we-tax-spending-instead-of-income/635720/54 "2012-09-25T22:21:02Z")
> [@amarone](#): > > And as you approach retirement and have $2m in assets, you are hoping to get about 6% income from that - 3% to offset inflation and 3% to spend (or spend a bit more if prepared to draw down capital). Unfortunately, you have to pay 10% asset tax, which way exceeds the growth, and hence your retirement savings now diminish rapidly. > > Your “asset tax” is a “screw retirees tax”. Thats all you got? Easy solutions, social security pretty much does it already. Some other government programs of allowing retirees a lower tax ate until their death at which point they get retroactively taxed for anything left. The next generation can make their own money on their own merits. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [September 25, 2012, 10:30pm UTC](https://boards.straightdope.com/t/should-we-tax-spending-instead-of-income/635720/55 "2012-09-25T22:30:09Z")
> [@Blaster\_Master](#): > > This is where a vastly simplified tax system on income just makes the whole system a lot easier. The employer has the context of all the money someone makes, they get the effective tax rate based on some formula, and they just pay it to the government. It’s hardly any burden on them and it’s the same for each employee. What is making income tax such a burden is how damned complicated the code is with all the exceptions and incentives. Cut that out and it’ll work a lot better. Mitt Romney is unemployed. > [@Untoward\_Parable](#): > > Describe to me the economy where this is disastrous. The economy where all the rich people take their ball and go home (i.e. move to Canada or England). Is home equity part of what you consider wealth? > [@emacknight](#): > > Are you familiar with the word consumption? People bought houses bigger than they could afford. Then took any equity out of them to spend. People spent. The US had a negative savings rate going into the recession. People foreclosed because they couldn’t cover the difference on their mortgage. Consumer credit was a huge part of the problem because after they defaulted on their homes, and their cars, they defaulted on their credit cards. And NONE of that was the cause of the current financial crisis. It wasn’t a main street driven collapse, it was a wall street driven collapse. We’ve had this discussion before and yes individuals are culpable for borrowing money to buy homes they cannot afford but imprudent lending on this sort of scale is NEVER the fault of the borrowers it is the fault of the lenders. Lenders had an incentive to make imprudent loans because of market failures. Those market failures were the cause of the collapse. As for the savings rate:[Table Data - Personal Saving Rate | FRED | St. Louis Fed](http://research.stlouisfed.org/fred2/data/PSAVERT.txt) I don’t see where our savings rate went negative or are you using some special definition of savings rate that gets you to that conclusion? I don’t think it matters because a negative savings rate isn’t what would have gotten us here. > [@](#): > > How is it that you don’t know any of this? Mostly because its not true. Secondly, are you proposing a consumption tax on purchasing homes? > [@](#): > > Sure, we could also use more tax revenue. Not nearly as much as we need consumption. We are suffering from an aggregate demand problem. > [@](#): > > And those wouldn’t be taxed, so they wouldn’t end up paying as much of their income in taxes. Isn’t that a good thing? Someone that spends 100% of their income on food clothing and shelter would pay 0% of their income in taxes. The more a person has to spend on extras the more a person pays in taxes. Sounds pretty progressive to me. You can’t fund the government with a luxury tax. > [@](#): > > Nope, the current level of government spending is way too high. I’m suggesting that it’s a good way for a government to make revenue that allows income taxes to be lower. Please cite for how our current government spending is significantly higher than it was under Bush taking into account the effects of the recession (higher food stamps and unemployment benefits, shit like that). And the OP isn’t talking about a hybrid tax system (I can get on board with that if properly structured), the conservatives want to REPLACE the income tax with the national sales tax. THATS what we are talking about here > [@](#): > > And a balanced budget, and UHC, and a lower unemployment rate… Yes, but you have a hybrid system not a pure consumption tax system which is what the OP is advocating. BTW your unemployment rate is 1% lower than ours. We tried for UHC and the conservative free market types shut us down. We wanted to move towards a balanced budget (we could get there in very short order if the economy recovered) but the conservative free market types who insisted that revenues would be increased over their dead bodies (to the point where they were holding extension of tax cuts for 98% of the country hostage until we also extended them for the top 2% of the country). > [@](#): > > Yup, transition sucks, people get over it. Transition to a hybrid system is MUCH MUCH easier than replacing your income tax system with a consumption tax system. What do you do about basis and recapture and and deferred income? I’m starting to get the feeling that you have missed an important point of this argument. > [@](#): > > I assume we’ll still have duty and import laws. Canadians can only do so much cross border shopping. After they make all their money here, why would they have to continue to live here? Why not just retire in Canada, hell at least you guys have UHC? And how do they catch your purchase of a diamond ring or when you drive a car across the border? > [@](#): > > Let me know when that happens, doesn’t look like it will be this election cycle, maybe 2016. I think there is a very good chance that we will see reform on capital gains rates and the carried interest exception. Reagan was able to do it in 1986. > [@](#): > > Because what you call “unearned income” others call capital gains. Back in 1921 the US government decided to tax capital gains differently than earned income and it’s been that way ever since. Glad we cleared that up. Are you under the impression that dividends are “earned income”? You do realize that dividends are also taxed at 15% right? You know that Reagan’s last act in office was to eliminate the capital gains rate differential right? You do realize WHY there is a capital gains preference right? There are several arguments but the best ones are not really valid anymore now that our tax system is relatively flat. > [@](#): > > Because hedge fund managers make a lot of money for the people who make laws. Remember: Is that supposed to be an excuse? ---
**Author:** ![amarone](https://avatars.discourse-cdn.com/v4/letter/a/e0b2c6/32.png) [@amarone](https://boards.straightdope.com/u/amarone)\ **Post date:** [September 25, 2012, 10:31pm UTC](https://boards.straightdope.com/t/should-we-tax-spending-instead-of-income/635720/56 "2012-09-25T22:31:07Z")
> [@Untoward\_Parable](#): > > Thats all you got? Nope. As 10% exceeds historical returns of portfolios ranging from 100% stocks all the way through to 100% bonds, nobody would ever be able to save for retirement as taxes would consume more than the growth. And that’s before taking into account the further erosion caused by inflation. > [@](#): > > Easy solutions, social security pretty much does it already. Does what, and how? Are your “easy solutions” simply not to impose the asset tax in all the situations where it would be a disaster? > [@](#): > > Some other government programs of allowing retirees a lower tax ate until their death at which point they get retroactively taxed for anything left. What are these programs so I can study how they work? > [@](#): > > The next generation can make their own money on their own merits. Who mentioned the next generation? ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [September 26, 2012, 12:38am UTC](https://boards.straightdope.com/t/should-we-tax-spending-instead-of-income/635720/57 "2012-09-26T00:38:22Z")
> [@Paranoid\_Randroid](#): > > Yes. The point here, though, is that the subjective valuations between persons A and B are strictly speaking incomparable. Person A won’t value his fifth TV as much as his fourth, but that doesn’t mean that he values his fifth TV — or his thirtieth — more or less than B values _her_ first. I do think that this doesn’t give us the whole story (see the “strictly speaking” clause). Sure - but for each person there seems to be an experimentally derived curve for each thing. Money is the common denominator. Because of our limited time marginal utility kicks in even if we buy only one of lots of things. That is not to say that we can provide a perfect level of progressive taxation that makes it absolutely fair for everyone, of course. The principle is pretty clear. And I think that most people who have had different levels of income can see marginal utility of cash pretty clearly. If they don’t resist for ideological reasons, that is. ---
**Author:** ![foolsguinea](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/foolsguinea/32/14751_2.png) [@foolsguinea](https://boards.straightdope.com/u/foolsguinea)\ **Post date:** [September 26, 2012, 5:01am UTC](https://boards.straightdope.com/t/should-we-tax-spending-instead-of-income/635720/58 "2012-09-26T05:01:50Z")
I agree with the idea of taxing net worth. A small [del]amount[/del] percentage, and probably a progressive schedule (top rate of 2.5%, say) with generous personal exemptions, but as supplement to the transactional taxes we have now. > [@Inigo\_Montoya](#): > > How about taxing net worth. Every year. This would generate stupid amounts of very predictable revenue, some of which can be funnelled into Social Security which can, in turn, be beefed up to provide a living income for retirees who felt forced to spend down their savings to pay taxes, eat, put kids through college, etc. Blaster Master, you made a really good post. I just have one problem: > [@Blaster\_Master](#): > > This is where a vastly simplified tax system on income just makes the whole system a lot easier. The employer has the context of all the money someone makes, they get the effective tax rate based on some formula, and they just pay it to the government. It’s hardly any burden on them and it’s the same for each employee. What is making income tax such a burden is how damned complicated the code is with all the exceptions and incentives. Cut that out and it’ll work a lot better. I’m actually in favor of exceptions and incentives. I want the ownership class to be incentivized to spend money. I think we should do like Truman and Eisenhower: marginal income taxes (for those who make 10 million+ annually) of 75% or even 91%, with write-offs for certain kinds of spending. Better to make it a clear choice between economic growth (spending) and economic stagnation (saving), than to have a relatively low rate with no incentive to spend. ---
**Author:** ![Red\_Wiggler](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/red_wiggler/32/13190_2.png) [@Red\_Wiggler](https://boards.straightdope.com/u/Red_Wiggler)\ **Post date:** [September 26, 2012, 4:36pm UTC](https://boards.straightdope.com/t/should-we-tax-spending-instead-of-income/635720/59 "2012-09-26T16:36:50Z")
Consumer spending is driven much more by perceived affordability (how much one makes, how much of it is discretionary, how confident one is in future income) than by sales tax ramifications. If the imposition of sales taxes replaces income tax withholding from one’s paycheck, the basic perception of the consumer won’t change. ---
**Author:** ![fumster](https://avatars.discourse-cdn.com/v4/letter/f/e9c0ed/32.png) [@fumster](https://boards.straightdope.com/u/fumster)\ **Post date:** [September 26, 2012, 4:49pm UTC](https://boards.straightdope.com/t/should-we-tax-spending-instead-of-income/635720/60 "2012-09-26T16:49:40Z")
> [@Clothahump](#): > > The answer is absolutely yes, we should tax spending. That is why I support the [Fair Tax.](http://www.fairtax.org) > > But it won’t work unless the 16th Amendment is repealed and the income tax goes back to being unconstitutional. I feel the same way about slavery. [Previous page](https://boards.straightdope.com/t/should-we-tax-spending-instead-of-income/635720.md?page=2) [Next page](https://boards.straightdope.com/t/should-we-tax-spending-instead-of-income/635720.md?page=4)