this thread represents 30 minutes of my life that I will never get back.

The fact that level of wealth varies over ones life is not the salient issue.

How does this follow? The simple inference from the above is that it = and not <

They pay taxes on the passive income, so the numerator and denominator both go up

Which is exactly what happens if you assume that all of the investment is eventually turned into consumption, which is taxed (or that there is some fraction of it that is not, but that we can ignore that fraction since it is Scrooge money)

This is a political issue as opposed to an economic one. Yes, it's inevitably an issue with the practical implementation of the sales tax, but it's not a problem with the sales tax per se. The issues could be solved by implementing and enforcing local taxation on imported consumer goods, or in the issue of emigration by taxing the wealth of anyone who emigrates at the sales tax rate.

I get it, you think my argument is stupid. All of your posts have done nothing more than express that opinion or restated the initial argument for why sales taxes are regressive. If that's all you're going to say, then I agree you're wasting time.

This would probably be seen as an advantage in the eyes of the detractors, who might think a one-off screwing of the wealthy is a sufficient trade-off for less taxation of the future wealthy.

You could get around it by giving people a one-off payment based on the value of their savings and investments (which would be unpopular for similar reasons as to why people think sales taxes are regressive, but any move to a sales tax based economy presumably has resulted from people changing their minds on this issue). It's kind of tricky with durable goods though: if I own a boat, I am worse off if I choose to sell it but I could just keep it and enjoy a stream of non-monetary benefits like I did before.

Hmm, this makes me think that durable goods are tricky to evaluate via sales taxes. A house can be a consumer good, an investment, or both. If it is subject to sales taxes, it overtaxes it as an investment; if it is not subject to sales taxes it undertaxes it as consumption.

The way to get around it would be to not tax the initial purchase, treating it like an investment. However, if you live in your own house, you are getting a stream of consumption benefits. Those could be taxed, evaluating the benefits at market rent. (If you want to avoid transitional problems, you could provide homeowners with a fund that pays interest equal to their tax liabilities. Future homeowners will benefit from keeping more of their income, which they could use if they were so inclined to create such a fund themselves).

First, we agree then that your argument is no longer based in reality and is purely theoretical then, right?

Second, you don't address things like a temporary vacation. If I take a one month vacation and blow $50,000 on food, wine, and crazy adventures - that money will never be taxed. Unless you expect people to record their expenditures and pay that sales tax when they get back.... which again, is not part of reality.

Why is declaring expenditures made overseas implausible, but declaring income made overseas not?

Furthermore, even if sales taxes do lead to more avoidance/evasion in some specific areas, these have to weighed up against the greater abilities to avoid/evade income taxes in other areas. For instance, sales taxes will almost certainly impose a higher burden on black market "workers" such as drug dealers, because it's a lot easier to have all your income earned in the black market than it is to have all your consumption made in the black market.

Maybe because the number of transactions involved is a few orders of magnitude different? Nah, that can't be it.

This is a wash. Now the drug buyers are avoiding tax instead of the dealers.

How do you know this is true? You could make an income with lots of small sales or one big sale, you could spend money in lots of small expenditures or one big expenditure.

In absolute terms, yes. In proportional terms (as this is the concept of the thread), it's not so likely.

If you're spending 100% of your income on black market goods, your reduction in taxes under a consumption system is going to be a much smaller proportion of your income than a black market dealer, although there are more people like you than the dealers. If we consider regressivity to be disproportionately worse as the gap increases, e.g. it's better to have two people paying 10% of their income in taxes when they should be paying 20% than to have one person paying 20% and another paying 0%, then this will lead to an increase in regressivity. Even if we don't, the fact that drug dealers are likely richer on average than their clients means that the shifting of evasion is more progressive.

And this doesn't apply to black market activities where there isn't a willing buyer, like extortion. Even if extorters were poorer than the extorted, we would probably not begrudge the latter for not paying taxes on income extorted out of them, or the extorters for having to pay taxes on the consumption with their ill-gotten gains. In any case, the tax would make extortion less profitable and thus deter it, which is desirable in and of itself.

bump