Flat consumption tax?

[Ramcoro]

A friend of mine suggested that we abolish corporate and income tax and impose a flat consumption tax.

The first problem I see it that it will proportionately hurt the poor the most. Second it will hurt the economy since it will discourage spending.

He argues that
"people that are mostly on minimum wage refuse to buy the products then the producers will have no choice but to lower the cost. As long as the Congress and Federal Reserve keep voting to print money out of thin air cereal won't cost 4 dollars a box its common sense"

I don't understand how a consumption tax will offset the removal off income tax and corporate tax unless spending is cut by like 99%.

Anyone have thoughts or comments about this topic?

[argeiphontes]

A friend of mine suggested that we abolish corporate and income tax and impose a flat consumption tax.

The first problem I see it that it will proportionately hurt the poor the most. Second it will hurt the economy since it will discourage spending.


Yes, that's what the result would be. It's another way to shift the tax burden onto the working class.



He argues that
"people that are mostly on minimum wage refuse to buy the products then the producers will have no choice but to lower the cost.


Well, that's just price competition. It's going on now, I don't see what this has to do with a flat tax.



As long as the Congress and Federal Reserve keep voting to print money out of thin air cereal won't cost 4 dollars a box its common sense"


Inflation isn't a problem at all in the US or Europe. In fact, some economists are trying to stir up support for creating more inflation because it could increase economic growth and employment. Inflation is bad for people who make a living off of interest--capitalists, so it's no surprise that they want to keep it low at all costs.



I don't understand how a consumption tax will offset the removal off income tax and corporate tax unless spending is cut by like 99%.


Yeah, it would have to be pretty high and, like you said, hit poor people disproportionately. The budget they passed today was one trillion. So, given a population of 250 million, that means they would have to raise $4000 per capita. Sure, rich people buy more and would pay more in absolute terms. But they save more (spend a lower percentage of their income) so they would pay less percentage-wise, which is basically the opposite of the progressive tax structure. (Such as it is.)

[Hiero]

Inflation isn't a problem at all in the US or Europe. In fact, some economists are trying to stir up support for creating more inflation because it could increase economic growth and employment. Inflation is bad for people who make a living off of interest--capitalists, so it's no surprise that they want to keep it low at all costs.


How does that work with economist who promote trying to keep unemployment steady to combat inflation and wage increases? Are they just two opposite opinions?

[argeiphontes]

They see inflation and unemployment as two sides of the same coin. So, if unemployment is too low it will cause inflation because wages will increase.

Since we have high unemployment, low growth, and low inflation, the idea would be to inject money into the system by any means necessary (burying it in the ground so people can dig it up) to create growth, which would cause inflation. The problem is that central banks are resisting anything that would increase inflation. Sorry I wasn't clear in my last post, it's not the inflation itself that causes growth, it's a side-effect of expansionary policy. IIRC.

[tuwix]

A friend of mine suggested that we abolish corporate and income tax and impose a flat consumption tax.

The first problem I see it that it will proportionately hurt the poor the most. Second it will hurt the economy since it will discourage spending.

He argues that
"people that are mostly on minimum wage refuse to buy the products then the producers will have no choice but to lower the cost. As long as the Congress and Federal Reserve keep voting to print money out of thin air cereal won't cost 4 dollars a box its common sense"

I don't understand how a consumption tax will offset the removal off income tax and corporate tax unless spending is cut by like 99%.

Anyone have thoughts or comments about this topic?


In Europe, we have some form of such tax called a Value Added Tax.
And yes, it is possible to eliminate corporate and income taxes with that, but the problem is that richest ones pay less those consumption taxes. They tend to collect money instead of spending them. Besides investing in shares on stock market isn't charged with this tax.

But I think that corporate tax is stupid too because it is easily avoidable. You can establish through internet a company in some tax heaven and produce nonexistent services that will make a cost for books that can produce fictional loss and if you have loss, you don't pay income tax.

The solution is progressive tax on all property. Not on real estate only, but on all assets. One should pay a percentage of possessions which should be the greater, the greater possessions are. It wouldn't be avoidable if applied properly.

[Ramcoro]

In Europe, we have some form of such tax called a Value Added Tax.
And yes, it is possible to eliminate corporate and income taxes with that, but the problem is that richest ones pay less those consumption taxes. They tend to collect money instead of spending them. Besides investing in shares on stock market isn't charged with this tax.

But I think that corporate tax is stupid too because it is easily avoidable. You can establish through internet a company in some tax heaven and produce nonexistent services that will make a cost for books that can produce fictional loss and if you have loss, you don't pay income tax.

The solution is progressive tax on all property. Not on real estate only, but on all assets. One should pay a percentage of possessions which should be the greater, the greater possessions are. It wouldn't be avoidable if applied properly.Corporate tax still does bring in a lot of money.

How would we go about enforcing a possession tax? How would we know what people have?

[Remus Bleys]

How can leftists support the bourgeois state taxing workers?

[tuwix]

Corporate tax still does bring in a lot of money.


Only from those companies who are stupid enough to pay it.



How would we go about enforcing a possession tax? How would we know what people have?

Isn't it obvious? Every rich one has a bank accounts and account on stock exchange, registered cars, registered real estates. It's simple to sum this up and tax.


How can leftists support the bourgeois state taxing workers?

Who says about taxing poor ones? There could be a level of assets on which there could be no taxes.
Besides we're considering here bourgeois state taxation. It doesn't mean anyone support such taxes in economic system he or she prefers.