Taxes --- The Nightmare of the American Dream?

[Ten thumbs]

And I disagree.  I'm familiar with most of the arguments, including some arcane, model based arguments economists use with respect to this issue, but the reality is when sales taxes are applied they are regressive because of the fact that lower income people spend a higher proportion of their income than higher income people and not all on exempted items.  In theory I suppose it is possible to make sales taxes far more efficient and equitable, but the practical difficulties in doing so would layer excessive administrative expenses (how to administer a progressive tax rate on different priced goods, etc) and would begin to skew consumption patterns more than existing sales taxes do, helping to negate the very benefit they are supposed to impart.

I think this a little overstated. You state that not all the expenditure of the poor is on exempt goods and imply that changes in sales tax have more of an impact. however, in practice the bulk of their outgoings are exempt, eg food, rent and rates. The major area that affects them is heat and light, which in the UK is taxed at half the normal VAT rate. As far as I can see, the recent cut in VAT from 17.5 to 15% does not help them much because I can't see the pound shops cutting their prices by 2p.

[Todd]

You state that not all the expenditure of the poor is on exempt goods and imply that changes in sales tax have more of an impact.

I was comparing lower income to higher income.  The "poor," however defined, do spend the majority of their income on exempted goods, but they also spend some small amount on non-exempted goods. 

But what about slightly further up the ladder?  I don't know what the UK income ranges are, but a family with $40,000-$50,000 a year in income in the US is not poor, but neither is it rich.  They do have enough income to spend a reasonable proportion of their income on non-exempt goods, and it will be various lower-middle and middle-income families that start facing the possibility of paying a higher relative portion of their income on sales taxes than a family with an income of, say, $100,000 or $200,000 or more.  There have been studies that show that sales taxes are regressive in that people with lower incomes (but not at a poverty level) do face a higher relative sales tax burden than people with higher incomes.  (I'd have to do some serious rummaging to find the studies I reviewed, though they were the dry, academic kind, not the think-tank kind.)  I suppose one could take the approach that such people should know their place and buy less, or buy cheaper goods, but I'm more concerned about equitable taxation. 

With the various sales, excise, property, and payroll taxes levied in the US, there is less progressivity in the system than many may think.  Progressive income taxes help tip the balance to a progressive overall system, but there are problems.  Of course, this assumes that one supports progressive taxation; I certainly do, but there are people who strongly believe in proportional taxation: everyone should pay the same rate and no more.  I think that's nonsense.

[Bulldog]

With the various sales, excise, property, and payroll taxes levied in the US, there is less progressivity in the system than many may think.  Progressive income taxes help tip the balance to a progressive overall system, but there are problems.  Of course, this assumes that one supports progressive taxation; I certainly do, but there are people who strongly believe in proportional taxation: everyone should pay the same rate and no more.  I think that's nonsense.

How so?

[Todd]

How so?

How so to which part?

[Florestan]

Indeed, and that's why I like to distinguish between Revolutionary Socialism (or perhaps Authoritarian/Totalitarian Socialism if you prefer) and its more democratic variety, where the legitimate views and needs and desires of the citizenry are taken into account. 

I make that distinction by using "Socialism" (without any qualifications) for the former and "Social-Democracy" for the latter.

Be the terminology as it may, the true line of separation between the two is the attitude towards free market.

[Bulldog]

How so to which part?

Never mind.  Since you keep insisting that a sales tax is inherently regressive regardless of how it is structured, there isn't any point in continuing.

[DavidW]

I think this a little overstated. You state that not all the expenditure of the poor is on exempt goods and imply that changes in sales tax have more of an impact. however, in practice the bulk of their outgoings are exempt, eg food, rent and rates.

Actually there is a food tax in the state that I live in!  And of course Todd was speaking of lower middle class families that spend most of their income.

[Ten thumbs]

Actually there is a food tax in the state that I live in!  And of course Todd was speaking of lower middle class families that spend most of their income.

In England we once had a tax on bread and it was not at all popular! Countries that attempt to minimise poverty (eg Switzerland and Sweden) tend to end with a better quality of life for all. This is not necessarily the same as being wealthier.