Sales taxes are regressive, and the current US tax system is deliberately progressive, in order to reflect our understanding of the marginal value of income.
The FairTax proposal improved on this by providing a rebate to everyone to cover tax for essentials. It also removed taxation on businesses which would likely cause prices to come down. There were many benefits and their research showed that overall tax burden would actually be less for the lower & middle class and higher for upper class (which avoids income tax anyways). Unfortunately it was too radical I believe, there's no way the U.S. would make that big of a leap.
It might still be slightly regressive, but that's not such a bad thing when overall tax burden would be reduced.
Markets are rarely competitive in a true sense. There are moats/barriers to competition, there's friction for users to switch to a different product. Companies often collude to keep prices static, or use a ratcheting mechanism to increase prices permanently[1].
[1] My trash removal company instituted a fuel tax 6 months ago when diesel was at an all time high. Diesel is now $.09 cheaper per gallon. Has the trash company stopped the surcharge? I'll leave it to your imagination. Oh and there are 5 trash companies in my area. They all charge within $.50/month for their service. I'm sure that's just the result of a competitive market.
Diesel fuel has gone up a lot more than $0.09 per gallon in the last year or two. It's close to doubled in fact, maybe more in some areas.
Yes in competitive markets you'd expect the pricess of commodity services to be close to the same. There isn't much differentiation other than price for something like trash removal. People will naturally choose the cheapest option. So all the services will cut their prices to the point where they will making their minimal acceptable profit.
Of course it's possible that the trash services are colluding to maintain higher prices. That's illegal, but it probably happens especially in something like trash removal where there's a history of corruption and the people involved all know or are related to each other.
Actually diesel in the US has had pretty stagnant prices the last four years. The big drop in 2020 (due to COVID wiping out demand) skews the averages and the Russian invasion of Ukraine has driven this year's prices high. But it's still $.09 cheaper than when my trash hauler instituted a "fuel surcharge."
Can you cite any known examples of reductions in some kind of non-explicit tax leading to reductions in prices (other than in cases where the tax is an explicit component of total cost, such as airline ticketing (at least since 2001)) ?
I have no interest in reducing the overall tax burden, and it would be helpful if proponents of ideas like FairTax were more explicit if this is the goal.
I want the various governments of the US to have control over a larger slice of GDP, not less.
Please cite one of those studies that claimed that higher income quintile and higher wealth quintiles would pay more under a "FairTax"-like system, because I've never seen one that makes that claim. Here is that specifically rebuts your claim:
"The FairTax is promoted as being progressive, but there is considerable skepticism of this claim. We examine the distributional effects of the FairTax, as well as the current system it intends to replace, under both annual income and lifetime income approaches. Global measures of progressivity suggest that the current federal tax system is progressive while the FairTax is regressive. Our results are also robust to different assumptions used for estimation."
Even if the rate is variable, sales taxes are still regressive. Poor people spend a much larger % of their income on goods compared to rich people. For me, personally, my sales tax would need to be around 1,000% (for every dollar I spend, I pay $10 in tax) to match what I pay in income tax.
but almost all the so-called 'socialist' nations in europe have heavier sales taxes...but we cannot do it here because it's regressive and we are so much more leftist than europe...tee hee...
Depends on what they are spending it on. If poor people are buying food & housing it would be tax free. If they are buying large screen TVs maybe not so much. But even then the claim was that prices would come down eliminating most of the cost of the tax (due to no taxes on businesses including payroll taxes). It also might mean higher wages. Obviously there was no way to prove these things as it hasn't been tried, but there was a lot of research done trying to model it out.
> But even then the claim was that prices would come down eliminating most of the cost of the tax (due to no taxes on businesses including payroll taxes)
We actually frequently try lowering corporate taxes. What we find is that prices stay high, wages stay low, but profits increase. Crazy.
I'm not following, it doesn't really matter what they consider it - I don't remember it being done before (reducing payroll taxes). Currently both the employer and the employee pay a big chunk here. In addition sole proprietors and self employed individuals pay even more.
A sole proprietor isn’t a corporation. I get the 20% deduction as well but it only applies to self employed individuals. All I was saying is I don’t think they have tried cutting corporate taxes other than the main corporate tax rate on profits. I think there was a misunderstanding.
Right, but my kids don't fund the federal government solely through a federal sales tax which is what this proposes. It just doesn't sound fair that they should be taxed to this degree without representation - it violates the social contract.
I think you said that taxation on your children without their (democratic) representation (via voting) was not a good thing and broke the social contract.
SoftTalker then noted that we tax resident aliens but do not allow them to vote, presumably seeing some similarity in terms its impact on the (implicit) social contract.
Thank you. A lot of times people end up talking Past each other in these sorts of threads. Appreciate it!
Yes. That is a contradiction. Categorically, it's not fair to expect someone to pay for things without letting them have some degree of decision making in how the money is spent. Otherwise it's simply robbery.
Yet that is precisely how our system works vis-a-vis resident aliens ("green card holders"). They have all the responsibilities of citizens but no right to vote.
Sounds messed up. I'd really hate to get into a dialog where this sort of stuff is justified because it's just running rampant and it's just easier to give up and convince oneself that it's actually ok because the alternative is simply too difficult to imagine.
The regressiveness of sales taxes is fairly irrelevant since the government can simply perform direct redistribution to achieve any desired level of progressivity.
