Talk:Consumption tax

Consumption tax does not incentive savings

That's a wrong statement, Consumption tax is neutral in intertemporal consumption decision, here is why: Assuming 20% VAT, here are NPVs To consume today, you pay 0,20(1) for every dollars spent. To consume in a year you pay 0,20(1)(1+i)/(1+i)=0,20(1) So it's the same. With income tax that's different, because interest will be taxed: If you consume today, you pay 0,20(1) If you consume tomorrow you pay [0,20(1)(1+i)+1(i)0,2]/(1+i) that is > than today consumption. So it is not correct to state that consumption tax encourage savings, is income tax that discourage savings. — Preceding unsigned comment added by 2.229.153.38 (talk) 11:59, 27 June 2015 (UTC)[reply]

level 3 header

It really doesn't make any sense as a level 2 header I don't know why you people keep reverting it back--152.163.100.198 01:48, 7 February 2006 (UTC)[reply]

Sprotected

The first sentence or two the start of the article, then it branches into the separate parts. Due to the spamming and rude comments from IPs Sprotect has been added until an administrator arrives Cordially SirIsaacBrock 01:46, 7 February 2006 (UTC)[reply]

Um, no, that's not how sprotect works--152.163.100.198 01:47, 7 February 2006 (UTC)[reply]

Only admins can protect pages. Please see Wikipedia:Requests for page protection or the Wikipedia:Administrators' noticeboard/Incidents to find an admin. I don't think you can just put up the template. Also, I don't think this is not a justified use for it. There's a disagreement on this page, not vandalism.--Bkwillwm 01:52, 7 February 2006 (UTC)[reply]

Read the edit comments SirIsaacBrock 01:56, 7 February 2006 (UTC)[reply]

I have. They're not a sign of good behavior, but not being cordial isn't listed as a justification for semiprotection.--Bkwillwm 01:58, 7 February 2006 (UTC)[reply]

User:152.163.101.9 This editor is a well known spammer named "Mr Treason" the notice advises that any contribution made by this editor has prior Wikipedia approval for deletion, which I did do.

The user(s) responsible for these edits are all banned, and all edits by them should be reverted on sight regardless of content.

Cordially SirIsaacBrock 03:11, 7 February 2006 (UTC)[reply]

Well that's a stupid message to put on the talk page of a sharedip--205.188.116.201 03:52, 7 February 2006 (UTC)[reply]

not good, not good

It's generally not considered polite to blank other people's comments--152.163.100.198 01:49, 7 February 2006 (UTC)[reply]

VAT ?

I suppose, that if we are talking about consumption tax the theoretical point of view, than as an example we have to mention not only American version, but also Value added taxes and Excise taxes.

I agree. Morphh ^(talk) 15:01, 03 April 2007 (UTC)[reply]

Should this article discuss foreign consumption tax scuh as the Goods and Services Tax introduced to Canada byt he Mulruney government in 1991. BKnoss 12:52, 12 May 2007 (UTC)[reply]

Yes - please add if you have information. Morphh ^(talk) 15:43, 12 May 2007 (UTC)[reply]

Couple of thoughts

I commend the writers on a well written page. I offer my comments here instead of changing the page itself because I don't think I have the mandate. The section on housing is pretty complicated and seeks to suggest that the taxation on rent/mortgages must be inherently complicated. This isn't true. A one-time tax on the amount of sale price (whatever the tax rate) seems the most intuitive approach. After that, rent could either be excluded or housing would be double taxed. Nothing unnatural or complicated. Also I think the article under presents the idea that a tax on consumption reduces administrative burden and effortlessly finds tax revenue from undocumented immigrants, launderers, black market participants, evaders, etc. --Gtg207u 18:27, 2 December 2007 (UTC)[reply]

Economics

>Economists generally favor consumption taxes over income taxes.

This is certainly not true. Sales and consumption taxes fly in the face of conservative economics and are not favored by so-called 'liberal' economists, each for their own reasons. While it is true that some professors and political economists have signed on to the FairTax, it's also opposed by many– if not most– economists.

If no reference can be provided, I propose deleting or correcting this statement.

--UnicornTapestry (talk) 22:02, 7 January 2008 (UTC)[reply]

I'll reworded it and add a referenced from Money Magazine that states "Many mainstream economists and tax experts like the idea of some kind of consumption tax -- in fact, the superiority of consumption taxes is almost conventional wisdom these days." Morphh ^(talk) 15:08, 05 February 2008 (UTC)[reply]

From the source referenced it looks like economists say the benefits of a consumption tax are good, (since they have similar benefits to all taxes). That doesn't necessarily mean as a whole those taxes are good. —Preceding unsigned comment added by 131.204.83.156 (talk) 18:38, 11 June 2008 (UTC)[reply]

I don't understand your statement. We're not talking about as a whole or the details of any particular plan, we're talking economics. The statement is in comparison to other tax systems and it is talking about economists - where not talking about politicians or special interest. Economically, the benefits of a consumption tax are superior. Morphh ^(talk) 20:26, 11 June 2008 (UTC)[reply]

The statement "Economists and tax experts generally favor consumption taxes," even with a couple of references is false. For one thing, it implies the majority of economists favor regressive taxes, whey they do not.

As a former economics instructor, I can assure you that so-called 'consumption' taxes, which include sales tax, excise tax, GST, VAT, TAV, and anything else on goods and services are regressive taxes, meaning they hurt the poor and favor the wealthy. Paul Samuelson and Milton Friedman, among others, have condemed such taxes. I wouldn't be surprised if John Kenneth Gailbraith felt similarly, but I have no direct knowledge.

This article reads more like a puff piece for the so-called FairTax (THERE's an oxymoron), rather than sound economic theory.

--UnicornTapestry (talk) 07:15, 3 September 2008 (UTC)[reply]

Consumption taxes don't have to be regressive. Different schemes have been proposed to set up systems of graduated tax rates on consumption spending. Consumption taxes are generally favored over others such as income taxes, which discourage labor, since taxing consumption encourages savings, which are usually thought to spur capital formation and long run growth. I think the statement stands that as a class, excluding progressivity, consumption taxes are viewed favorably for distorting the economy to favor saving instead ofdistorting it to penalize production. The statement may need to be qualified, but I think it's legitimate.--Bkwillwm (talk) 11:58, 3 September 2008 (UTC)[reply]

The sentence is incomplete. It makes the assumption that it's talking about economics or economic growth, which needs to be specified. Bkwillwm is correct regarding progressivity. There are many ways to make consumption taxes progressive, and such a tax does not always imply a direct tax on goods and services. Flat taxes that exclude a base amount of income are often considered consumption taxes when they favor savings and investment. The Hall-Rabushka flat tax is an example. Even when taxing goods, it depends what is being taxed. A luxury tax is considered progressive. Untaxing food and clothing is considered to have progressive effects. I'll specify what they are talking about to clarify the statement as certainly economists and tax experts disagree on other areas of consumption taxes. I've added another reference that discusses a recent OECD study. I haven't read through the entire article, but I'll try to go through it soon and balance any "puff". Morphh ^(talk) 13:01, 03 September 2008 (UTC)[reply]

Just started to read the lead and it needs a rewrite as it excludes income based consumption taxes, which is what the bulk of the article currently describes (Cash Flow Personal Income Tax). Morphh ^(talk) 14:45, 03 September 2008 (UTC)[reply]

Let's face it, though. We're attempting to justify consumption taxes as 'moral suasion' that encourages savings, but that's really a mask for what's going on behind the scenes. None of us wants to pay tax, but it's unfair to the struggling lower/middle classes to keep heaping the burden on them.

The whole point of consumption taxes is to shift taxes from the wealthy. While there can be a number of tricks (rebates, etc) to take some of the burden off the poorest, it still strongly favors the upper class which has numerous ways to avoid paying tax.

The only semi-fair consumption tax I'm aware of has been the luxury tax, but luxury taxes seldom last long. For example, the State of Indiana had no sales tax but placed a 10% luxury tax on jewelry, furs, and a few other high-end categories. Legislators eventually replaced the luxury tax with a general sales tax using the excuse that it was 'unfair' and prevented the average citizen from affording jewels and furs, adversely impacting those merchants. Really, is this what the middle class is worried about?

While I'm hardly a fan of the IRS (grrr), deductions for savings and investments encourages sensible microeconomics, while maintaining a progressive tax structure. Tax avoidance is a legitimate and even encouraged practice, but it shouldn't be used to stack the deck against others.

--UnicornTapestry (talk) 23:14, 18 September 2008 (UTC)[reply]

Comment

The poorer would be less likely to consume, decreasing business. Additionally, the cost of 'feeling' like they are living a better life would grow much higher, decreasing their sense of their standard of living. Both these would decrease investments. Instead of people reaching higher they would be shooting lower. With a decrease in aspiration and business, the standard of living would actually drop.

~ NantucketNoon (talk) 08:29, 16 November 2008 (UTC)[reply]

That would completely depend on the tax and the structure and what type of tax system it is offsetting if any. Every form of taxation has effects to economic growth in one way or another. I would say that in general you are correct in that all taxes decrease standard of living, spending, and investment. However, suggesting in general that consumption taxes do so more than other forms of taxes seems contradictory to research and empirical evidence but again that would be dependent on the tax system. Morphh ^(talk) 1:17, 17 November 2008 (UTC)

Supply Side Bias & Fantasy

"taxing consumption instead of income should encourage both work and capital formation, which will increase economic growth, while discouraging consumption"

Because the real universe involves supply and demand, anything that discourages consumption decreases economic growth, as much as anything that discourages investment. And taxing consumption does not, in some normative sense, encourage work, because it reduces the potential to use the fruits of labor. If prices increase, do people work more? Inflationary history certainly doesn't suggest it.

"Also, a consumption tax could utilize progressive rates in order to maintain "fairness." ... The rate structure could look like the current bracket system, or a new bracket system could be implemented."

An encyclopedic entry on something very real and widespread should not spend time elaborating imaginary structures, especially one that looks like a house of cards. The process of making consumption taxes "as progressive as wanted" would require tracking somone's purchasing activity as well as income and wealth, in real time. Credit card companies can't adjust rates on the fly according to changing credit scores, which themselves change ponderously slowly. To expect state or federal governments to pull off this trick is science-fiction. — Preceding unsigned comment added by Hadescorpus (talk • contribs) 10:31, 19 November 2011 (UTC)[reply]

Economics section is incorrect

The economics section states that consumption tax as opposed to income tax discourages consumption and encourages savings and investment. This is ONLY true if you replace BOTH the labor income tax and the capital income tax with a consumption tax. More realistically, the comparison should be between labor income tax and consumption tax. There is actually NO difference between the two, if capital gains tax is kept constant.

Assume 50% capital gains tax and the asset doubles over its holding period:

Also assume 50% income tax: Earn $100 -> $50 after income tax -> $100 after growth -> $75 after capital gains tax

Instead assume 50% consumption tax: Earn $100 -> $200 after growth -> $150 after capital gains tax -> $75 after consumption tax

Unfortunately most articles written about income versus consumption tax overlook this simple fact and mistakenly attribute the "savings effect" to the consumption tax when it was really the abolition of the capital gains tax which did it. You could have gotten the same effect by eliminating capital gains tax and keep labor income tax.

There is one crucial difference between an income and consumption tax, however: Individuals can smooth their consumption, but often not their income. A person who is unfortunate enough to have wildly fluctuating income (perhaps because he takes years out of the labor force to go back to school) will pay a higher tax due to the progressive income tax than someone with the exact same consumption pattern but who receives his income smoothly. This is rather arbitrary, and unfairly penalizes such people with irregular income patterns and also discourages career paths that have them.

There is also some arbitrariness to the capital gains tax. Originally intended as a tax on the rich, who accrue, on average, more capital income than poor people, it HAS had the unpleasant side effect of discouraging saving and investment. Society would be more fair if the capital gains tax was abolished and the revenue made up by making the consumption tax even more progressive. Since consumption is, after all, what we want to redistribute.

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Not sure about this at all

There is no Consumption Tax (as such), VAT and GST for example are tax for end consumer unless you are a business, so a business "consumes" without being subject to this tax. To me the whole article is a misnomer and a kind of miss-step i.e. not at all true, and based on a page start that read "and they're essentially the same thing" which is rubbish, also, in the lead it says "However, a consumption tax can also be structured as a form of direct, personal taxation, such as the Hall–Rabushka flat tax." more rubbish I am afraid. If any State at all has something called consumption tax, add it here and reference it. One or two high value individuals calling for some kind of consumption tax is not consumption tax. Get what you need off of this article and make it a redirect to VAT.121.99.108.78 (talk) 07:27, 27 January 2020 (UTC)[reply]