6 ms·

Why hasn't AI proposed the ultimate "fair" taxation scheme?

rayiner 2mo ago
We already have expert consensus on what’s the best taxes, people just don’t like the answer: https://www.npr.org/sections/money/2012/07/19/157047211/six-policies-economists-love-and-politicians-hate https://www.npr.org/sections/money/2012/07/19/157047211/six-... (“Three. Eliminate the corporate income tax. Completely. If companies reinvest the money into their businesses, that's good. Don't tax companies in an effort to tax rich people. Four. Eliminate all income and payroll taxes. All of them. For everyone. Taxes discourage whatever you're taxing, but we like income, so why tax it? Payroll taxes discourage creating jobs. Not such a good idea. Instead, impose a consumption tax, designed to be progressive to protect lower-income households.”).
- throw101010 2mo ago
  Why would you want to "discourage consumption" by taxing it? Following the logic in your message. I know you are just quoting this transcript/article... but you likely have an idea of how this would work since you classify this as the best solution. Especially interested on how you would progressively tax consumption... How do you apply brackets to the day-to-day purchases? The general answer is to demand people to report their income/savings and the difference is taxed... and rich people will just game this as easily as the income taxes (if not more easily).
  - rayiner 2mo ago
    I’m not classifying it as the best solution. I’m quoting an NPR article describing the consensus view of economics experts. But as I understand it, the reason is that consumption taxes have the least distortion in terms of deviating from the efficient behavior in the no-tax scenario: https://www.weforum.org/stories/2019/09/using-tax-to-tackle-wealth-inequality-heres-how/ https://www.weforum.org/stories/2019/09/using-tax-to-tackle-...
    - dpark 2mo ago
      That article spends most of its time explaining why a progressive consumption tax is obviously the right choice, then basically decries liberals as too dumb to understand it and conservatives as too evil to want it, but spends zero words to explain how a progressive consumption tax might possibly be implemented.
      - hollerith 2mo ago
        >spends zero words to explain how a progressive consumption tax might possibly be implemented. The implementation could consist of a tax on personal income, but any re-investment of that income is deductible, plus a tax on luxury items and products whose main purpose is status-signaling.
        dpark 2mo ago
        You’ve gotta squint each hard to call an income tax with deductions a consumption tax. That’s what we have in the US right now.
        satvikpendem 2mo ago
        Not really especially for W2 employees as they have very few deductions. In contrast, I have an LLC for my work and I can pay basically zero tax by reinvesting it into business expenses (which are consumption like new office equipment or client meals) or even funneling it into my 401k. That's the model they mean, not the current W2 deduction model.
        dpark 2mo ago
        > Not really especially for W2 employees as they have very few deductions Right. Individuals are taxed on income and not consumption. Taxes don’t go down if they save instead of spend (in fact they go up as they are taxed on the interest earned). There’s nothing about this that’s consumption based so a replacement system that looks basically the same but with more deductions is also not a consumption tax. Businesses are weird already and are taxed on profit rather than income. Anything that reduces profit on paper reduces tax, whether it’s actually consumption or not (e.g. stock buy backs).
  - fyredge 2mo ago
    I was initially skeptical of removal of income tax, but it's replacement with consumption tax makes sense. Currently, income is "discouraged" through financial instruments such as Securities-Backed Line of Credit (SBLOC), which are very much only feasible in the realm of the very rich. Some part of this loophole can be offset by corporate tax, but corporate tax is based on profit, not income, incentivising all sorts of unproductive spending behaviour e.g. stock buybacks. To me, the switch to consumption tax does a couple of things: 1. Instill discipline. Higher spending does not equate to higher productivity. By taxing spending, discipline will be instilled in both the consumer and corporation. With consumption tax, there will be no brackets, rather the amount of tax will be based on what the government policy is. Smoking bad? Higher tax. Soy milk more environmentally friendly? Lower tax. 2. Simplify tax situation with "capital gains". You pay tax upfront, now we don't need to evaluate what happens to the value of the stock, that will be the problem for the next buyer. No loophole for capital gains tax with inheritance.
    - shinryuu 2mo ago
      The problem with consumption tax is that it's regressive. Poor(er) people are hit harder with such a tax.
      - neonstatic 2mo ago
        Depends what is being taxed. Staples could be excluded, while luxury items taxed more heavily.
        snovv_crash 2mo ago
        Senate argument: "This poweryacht is necessary for my donor's livelihood of entertaining billionaires"
        fyredge 2mo ago
        This argument kind of illustrates why consumption tax is better. It's easy to advocate "lower taxes for everyone!" giving rich people most of the benefit, but it's much harder to advocate for "lower yacht tax!" without pissing off a whole bunch of wage workers.
- dataflow 2mo ago
  > Taxes discourage whatever you're taxing, but we like income, so why tax it? How about to discourage the development of extreme income and/or wealth inequality? Or do you want to encourage them?
  - deleted 2mo ago
    [deleted]
- ekelsen 2mo ago
  At least for me, even income taxes as high as 53% have not discouraged me from trying to make more money. They have made me consider moving. At some level, certainly at 90%+, the most rational thing to do to make more money is to spend time lowering your tax bill, which is not a particularly beneficial way (to society) of making more money. But I can't image anyone at an income tax level of say 10% is being actively discouraged from making more money? Like you need it to survive, so choosing to make _no_ money because of taxes seems like a very bad strategy.
  - roenxi 2mo ago
    Prices are set on the margins, the reason people are paid what they are is because even a relatively small change would cause someone to do something differently. Same theory as why we can be confident raising the price of something a few cents is likely to cause someone to change their decisions - if it wasn't, the seller would raise the price by a few cents. It isn't obvious what a 10% across-the-market tax will do, but by the nature of prices they are always going to be set near tipping points so it probably is going to cause people to drop out of the workforce or reduce the amount of time they spend working. Maybe tip people into less productive jobs that pay cash. I dunno. How many people and how many hours is an open question but all your imagination is really telling you is that you don't deal with marginal participants in the workforce.
    - ekelsen 2mo ago
      I think you're relying far too much on an econ 101 idea to analyze a situation that's far more complicated.
      - roenxi 2mo ago
        [flagged]
    - satvikpendem 2mo ago
      Not necessarily, many things are sticky and inelastic where in a perfectly economically driven world they'd be elastic. People for example still paid for eggs even as the egg companies made record profits during the pandemic, turns out it wasn't all the bird flu.
- dpark 2mo ago
  This is not an expert consensus. It’s one random npr story. Switching entirely to consumption tax is a billionaires dream. Dropping corporate income tax is a CFO’s dream. (Whoever wrote the line about how reinvested money shouldn’t be taxed is also an idiot. Taxes are on profits. Money reinvested in the business becomes an expense and so is not taxed. What is discouraged through business taxation is sitting on large corporate coffers.)
  - rayiner 2mo ago
    It's an NPR story with economics experts describing positions that are consensus in their field but politically unpopular. > Tuesday's show presented the common-sense, no-nonsense Planet Money economic plan — backed by economists of all stripes, but probably toxic to any candidate that might endorse it... There you have it, six major proposals that have broad agreement, at least among economists.
    - astrange 2mo ago
      I doubt deleting income tax is a popular view among economists. Income and payroll taxes have the feature that you always have the money when it's time to pay the tax. That also means they're disinflationary. Whereas property taxes can be inflationary because they may require you to sell assets.
      - snovv_crash 2mo ago
        Georgism style property taxes are only due on the sale of the property so also have the money available then.
        astrange 2mo ago
        I thought the point of an LVT was to force land sales for more productive uses.
- dmitrig01 2mo ago
  To what end? "Best" implies towards a certain goal. Is the goal economic growth? Or is it a fair society? Those are very different. For example, if the goal is a fair society, then we should have a wealth tax, to disincentivize wealth equality. (And an income tax isn't so bad either in). Having only a consumption tax makes sense if the goal is (only) to reduce consumption.
  - rayiner 2mo ago
    The goal is economic growth, which matters more than anything else. Fun fact: in 1900, Argentina was one of the richest countries in the world, at about 60% of US GDP per capita: https://ourworldindata.org/data-insights/argentina-was-one-of-the-richest-countries-in-the-world-at-the-beginning-of-the-20th-century https://ourworldindata.org/data-insights/argentina-was-one-o.... Today, Argentina has under 20% of the GDP per capita of the US. The difference is that the U.S. has grown at about 1.7% annually for the past century and change, while Argentina only grew at about 1% annually. Maybe you're willing to give up 70 basis points in pursuit of a "fairer" society, but that means your grandkids will live in a much poorer society than they'd otherwise live in. This is the trajectory Europe is in currently. Having missed the boat on the Internet, space travel, and now AI, I suspect my grandkids will see a world where people are immigrating from Europe to China the way we see people immigrating from Argentina to the U.S.
    - autoexec 2mo ago
      > The goal is economic growth, which matters more than anything else. That sounds like an argument for human slavery
      - OKRainbowKid 2mo ago
        And is not sustainable with finite and contested resources.
      - simianwords 2mo ago
        False. The consensus is that slavery hurts economic growth.
- godwinson__4-8 2mo ago
  This reminds me of a rather odious napkin. https://americanhistory.si.edu/collections/object/nmah_1439217 https://americanhistory.si.edu/collections/object/nmah_14392... I wonder if people like Dick Cheney and Don Rumsfeld being at the scene of the crime is part of why "people just don't like the answer". Then again, perhaps it is revealing in some way of the answer offered itself.
- altmanaltman 2mo ago
  This is not "expert consensus", they bought in 5 economics with different political leanings and tried to get them to agree to common points (even though they do not agree with each other politically) and this was what they agreed on. And this was in 2012, 14 years ago. If you do the same experiment again with 100 economists, they might have a widely different plan. Yes its an interesting article but you can't call it expert consensus and neither does NPR or any of the economists linked in there.
  - rayiner 2mo ago
    The economists were asked to weigh in on behalf of their field, not just their personal views: > There you have it, six major proposals that have broad agreement, at least among economists The NPR article attributes the proposals to economists broadly, not just the specific panel.
- jdashg 2mo ago
  It's better for five people to earn $100k than for one person to earn $500k and four people nothing. That is a societal negative that progressive and marginal income tax discourages.
- Eddy_Viscosity2 2mo ago
  This approach is the perfect "the richer get richer" inequality engine that would run things even faster than our current system (which works pretty well already). Even the most consumerist of the super-rich spend that tiniest fraction on taxable consumables compared with any given salaried employee. Which means they have more to invest to increase their wealth (and gap between them and everyone else) even faster.
  - TimorousBestie 2mo ago
    > This approach is the perfect "the richer get richer" inequality engine that would run things even faster than our current system (which works pretty well already). That’s the idea. Lawyers accustomed to the patronage of wealthy clients need more of them to maintain their lifestyle.
    - rayiner 2mo ago
      No, I'm just another third worlder who escaped a socialist country.
      - TimorousBestie 2mo ago
        As you remind us all once or twice a day. The two things aren’t mutually exclusive, of course.
        rayiner 2mo ago
        Yet you continue to make ad hominem arguments based on imagined motivations.
  - rayiner 2mo ago
    The key insight is that wealth that’s not spent has no effect on anyone else. It’s just a number on paper.
    - Eddy_Viscosity2 2mo ago
- spwa4 2mo ago
  This is easily defeated by fake companies. This only works if companies always work in the best interest of the economy. If someone were to create a company that sells doohickeys for profit AND to make sure one particular family is comfortable (ie. directly providing housing for them, servants, an "expense account", ...) that would defeat such a tax scheme. Systems are built on human behavior. Humans who spend entire lives looking for ways to exploit system. The above system was tried, and indeed got exploited for luxury in a big way. To some extent I agree to the income tax idea. But you're far too extreme. Income tax makes jobs possible or impossible. The lower it is, the more occupations are realistic to have. So we should have a rule for governments: if unemployment is above, say, 4%, income tax must go down until unemployment drops below that 4%. If unemployment is below 2%, income tax should rise, and the state should be forced to deal with the lost income. This probably isn't a good rule as stated, but something along these lines would be good.
  - ieatcandlewax 2mo ago
    This is something that happens right now and is currently known as "embezzlement". This will generally get you in trouble right now, so I can conceive of a world where it would get you in trouble. I can imagine that some people would get away with it—but that's also kind of how the world works, some people will always game the system to their benefit like they do in every political system. I think we're pretty far from devising a perfect system that is ungameable, so I don't see the point in devising scenarios where they are gamed. A better metric imo for a tax system is seeing how much of the tax burden rests with people who work for wages vs people who own capital and comparing that to their proportion of the total wealth.
dzhiurgis 2mo ago
Because it’s an oxymoron.

We already have expert consensus on what’s the best taxes, people just don’t like the answer: https://www.npr.org/sections/money/2012/07/19/157047211/six-policies-economists-love-and-politicians-hate https://www.npr.org/sections/money/2012/07/19/157047211/six-... (“Three. Eliminate the corporate income tax. Completely. If companies reinvest the money into their businesses, that's good. Don't tax companies in an effort to tax rich people. Four. Eliminate all income and payroll taxes. All of them. For everyone. Taxes discourage whatever you're taxing, but we like income, so why tax it? Payroll taxes discourage creating jobs. Not such a good idea. Instead, impose a consumption tax, designed to be progressive to protect lower-income households.”).

throw101010 2mo ago
Why would you want to "discourage consumption" by taxing it? Following the logic in your message. I know you are just quoting this transcript/article... but you likely have an idea of how this would work since you classify this as the best solution. Especially interested on how you would progressively tax consumption... How do you apply brackets to the day-to-day purchases? The general answer is to demand people to report their income/savings and the difference is taxed... and rich people will just game this as easily as the income taxes (if not more easily).
- rayiner 2mo ago
  I’m not classifying it as the best solution. I’m quoting an NPR article describing the consensus view of economics experts. But as I understand it, the reason is that consumption taxes have the least distortion in terms of deviating from the efficient behavior in the no-tax scenario: https://www.weforum.org/stories/2019/09/using-tax-to-tackle-wealth-inequality-heres-how/ https://www.weforum.org/stories/2019/09/using-tax-to-tackle-...
  - dpark 2mo ago
    That article spends most of its time explaining why a progressive consumption tax is obviously the right choice, then basically decries liberals as too dumb to understand it and conservatives as too evil to want it, but spends zero words to explain how a progressive consumption tax might possibly be implemented.
    - hollerith 2mo ago
      >spends zero words to explain how a progressive consumption tax might possibly be implemented. The implementation could consist of a tax on personal income, but any re-investment of that income is deductible, plus a tax on luxury items and products whose main purpose is status-signaling.
      - dpark 2mo ago
        You’ve gotta squint each hard to call an income tax with deductions a consumption tax. That’s what we have in the US right now.
        satvikpendem 2mo ago
        Not really especially for W2 employees as they have very few deductions. In contrast, I have an LLC for my work and I can pay basically zero tax by reinvesting it into business expenses (which are consumption like new office equipment or client meals) or even funneling it into my 401k. That's the model they mean, not the current W2 deduction model.
        dpark 2mo ago
        > Not really especially for W2 employees as they have very few deductions Right. Individuals are taxed on income and not consumption. Taxes don’t go down if they save instead of spend (in fact they go up as they are taxed on the interest earned). There’s nothing about this that’s consumption based so a replacement system that looks basically the same but with more deductions is also not a consumption tax. Businesses are weird already and are taxed on profit rather than income. Anything that reduces profit on paper reduces tax, whether it’s actually consumption or not (e.g. stock buy backs).
- fyredge 2mo ago
  I was initially skeptical of removal of income tax, but it's replacement with consumption tax makes sense. Currently, income is "discouraged" through financial instruments such as Securities-Backed Line of Credit (SBLOC), which are very much only feasible in the realm of the very rich. Some part of this loophole can be offset by corporate tax, but corporate tax is based on profit, not income, incentivising all sorts of unproductive spending behaviour e.g. stock buybacks. To me, the switch to consumption tax does a couple of things: 1. Instill discipline. Higher spending does not equate to higher productivity. By taxing spending, discipline will be instilled in both the consumer and corporation. With consumption tax, there will be no brackets, rather the amount of tax will be based on what the government policy is. Smoking bad? Higher tax. Soy milk more environmentally friendly? Lower tax. 2. Simplify tax situation with "capital gains". You pay tax upfront, now we don't need to evaluate what happens to the value of the stock, that will be the problem for the next buyer. No loophole for capital gains tax with inheritance.
  - shinryuu 2mo ago
    The problem with consumption tax is that it's regressive. Poor(er) people are hit harder with such a tax.
    - neonstatic 2mo ago
      Depends what is being taxed. Staples could be excluded, while luxury items taxed more heavily.
      - snovv_crash 2mo ago
        Senate argument: "This poweryacht is necessary for my donor's livelihood of entertaining billionaires"
        fyredge 2mo ago
        This argument kind of illustrates why consumption tax is better. It's easy to advocate "lower taxes for everyone!" giving rich people most of the benefit, but it's much harder to advocate for "lower yacht tax!" without pissing off a whole bunch of wage workers.
dataflow 2mo ago
> Taxes discourage whatever you're taxing, but we like income, so why tax it? How about to discourage the development of extreme income and/or wealth inequality? Or do you want to encourage them?
- deleted 2mo ago
  [deleted]
ekelsen 2mo ago
At least for me, even income taxes as high as 53% have not discouraged me from trying to make more money. They have made me consider moving. At some level, certainly at 90%+, the most rational thing to do to make more money is to spend time lowering your tax bill, which is not a particularly beneficial way (to society) of making more money. But I can't image anyone at an income tax level of say 10% is being actively discouraged from making more money? Like you need it to survive, so choosing to make _no_ money because of taxes seems like a very bad strategy.
- roenxi 2mo ago
  Prices are set on the margins, the reason people are paid what they are is because even a relatively small change would cause someone to do something differently. Same theory as why we can be confident raising the price of something a few cents is likely to cause someone to change their decisions - if it wasn't, the seller would raise the price by a few cents. It isn't obvious what a 10% across-the-market tax will do, but by the nature of prices they are always going to be set near tipping points so it probably is going to cause people to drop out of the workforce or reduce the amount of time they spend working. Maybe tip people into less productive jobs that pay cash. I dunno. How many people and how many hours is an open question but all your imagination is really telling you is that you don't deal with marginal participants in the workforce.
  - ekelsen 2mo ago
    I think you're relying far too much on an econ 101 idea to analyze a situation that's far more complicated.
    - roenxi 2mo ago
      [flagged]
  - satvikpendem 2mo ago
    Not necessarily, many things are sticky and inelastic where in a perfectly economically driven world they'd be elastic. People for example still paid for eggs even as the egg companies made record profits during the pandemic, turns out it wasn't all the bird flu.
dpark 2mo ago
This is not an expert consensus. It’s one random npr story. Switching entirely to consumption tax is a billionaires dream. Dropping corporate income tax is a CFO’s dream. (Whoever wrote the line about how reinvested money shouldn’t be taxed is also an idiot. Taxes are on profits. Money reinvested in the business becomes an expense and so is not taxed. What is discouraged through business taxation is sitting on large corporate coffers.)
- rayiner 2mo ago
  It's an NPR story with economics experts describing positions that are consensus in their field but politically unpopular. > Tuesday's show presented the common-sense, no-nonsense Planet Money economic plan — backed by economists of all stripes, but probably toxic to any candidate that might endorse it... There you have it, six major proposals that have broad agreement, at least among economists.
  - astrange 2mo ago
    I doubt deleting income tax is a popular view among economists. Income and payroll taxes have the feature that you always have the money when it's time to pay the tax. That also means they're disinflationary. Whereas property taxes can be inflationary because they may require you to sell assets.
    - snovv_crash 2mo ago
      Georgism style property taxes are only due on the sale of the property so also have the money available then.
      - astrange 2mo ago
        I thought the point of an LVT was to force land sales for more productive uses.
dmitrig01 2mo ago
To what end? "Best" implies towards a certain goal. Is the goal economic growth? Or is it a fair society? Those are very different. For example, if the goal is a fair society, then we should have a wealth tax, to disincentivize wealth equality. (And an income tax isn't so bad either in). Having only a consumption tax makes sense if the goal is (only) to reduce consumption.
- rayiner 2mo ago
  The goal is economic growth, which matters more than anything else. Fun fact: in 1900, Argentina was one of the richest countries in the world, at about 60% of US GDP per capita: https://ourworldindata.org/data-insights/argentina-was-one-of-the-richest-countries-in-the-world-at-the-beginning-of-the-20th-century https://ourworldindata.org/data-insights/argentina-was-one-o.... Today, Argentina has under 20% of the GDP per capita of the US. The difference is that the U.S. has grown at about 1.7% annually for the past century and change, while Argentina only grew at about 1% annually. Maybe you're willing to give up 70 basis points in pursuit of a "fairer" society, but that means your grandkids will live in a much poorer society than they'd otherwise live in. This is the trajectory Europe is in currently. Having missed the boat on the Internet, space travel, and now AI, I suspect my grandkids will see a world where people are immigrating from Europe to China the way we see people immigrating from Argentina to the U.S.
  - autoexec 2mo ago
    > The goal is economic growth, which matters more than anything else. That sounds like an argument for human slavery
    - OKRainbowKid 2mo ago
      And is not sustainable with finite and contested resources.
    - simianwords 2mo ago
      False. The consensus is that slavery hurts economic growth.
godwinson__4-8 2mo ago
This reminds me of a rather odious napkin. https://americanhistory.si.edu/collections/object/nmah_1439217 https://americanhistory.si.edu/collections/object/nmah_14392... I wonder if people like Dick Cheney and Don Rumsfeld being at the scene of the crime is part of why "people just don't like the answer". Then again, perhaps it is revealing in some way of the answer offered itself.
altmanaltman 2mo ago
This is not "expert consensus", they bought in 5 economics with different political leanings and tried to get them to agree to common points (even though they do not agree with each other politically) and this was what they agreed on. And this was in 2012, 14 years ago. If you do the same experiment again with 100 economists, they might have a widely different plan. Yes its an interesting article but you can't call it expert consensus and neither does NPR or any of the economists linked in there.
- rayiner 2mo ago
  The economists were asked to weigh in on behalf of their field, not just their personal views: > There you have it, six major proposals that have broad agreement, at least among economists The NPR article attributes the proposals to economists broadly, not just the specific panel.
jdashg 2mo ago
It's better for five people to earn $100k than for one person to earn $500k and four people nothing. That is a societal negative that progressive and marginal income tax discourages.
Eddy_Viscosity2 2mo ago
This approach is the perfect "the richer get richer" inequality engine that would run things even faster than our current system (which works pretty well already). Even the most consumerist of the super-rich spend that tiniest fraction on taxable consumables compared with any given salaried employee. Which means they have more to invest to increase their wealth (and gap between them and everyone else) even faster.
- TimorousBestie 2mo ago
  > This approach is the perfect "the richer get richer" inequality engine that would run things even faster than our current system (which works pretty well already). That’s the idea. Lawyers accustomed to the patronage of wealthy clients need more of them to maintain their lifestyle.
  - rayiner 2mo ago
    No, I'm just another third worlder who escaped a socialist country.
    - TimorousBestie 2mo ago
      As you remind us all once or twice a day. The two things aren’t mutually exclusive, of course.
      - rayiner 2mo ago
        Yet you continue to make ad hominem arguments based on imagined motivations.
- rayiner 2mo ago
  The key insight is that wealth that’s not spent has no effect on anyone else. It’s just a number on paper.
  - Eddy_Viscosity2 2mo ago
spwa4 2mo ago
This is easily defeated by fake companies. This only works if companies always work in the best interest of the economy. If someone were to create a company that sells doohickeys for profit AND to make sure one particular family is comfortable (ie. directly providing housing for them, servants, an "expense account", ...) that would defeat such a tax scheme. Systems are built on human behavior. Humans who spend entire lives looking for ways to exploit system. The above system was tried, and indeed got exploited for luxury in a big way. To some extent I agree to the income tax idea. But you're far too extreme. Income tax makes jobs possible or impossible. The lower it is, the more occupations are realistic to have. So we should have a rule for governments: if unemployment is above, say, 4%, income tax must go down until unemployment drops below that 4%. If unemployment is below 2%, income tax should rise, and the state should be forced to deal with the lost income. This probably isn't a good rule as stated, but something along these lines would be good.
- ieatcandlewax 2mo ago
  This is something that happens right now and is currently known as "embezzlement". This will generally get you in trouble right now, so I can conceive of a world where it would get you in trouble. I can imagine that some people would get away with it—but that's also kind of how the world works, some people will always game the system to their benefit like they do in every political system. I think we're pretty far from devising a perfect system that is ungameable, so I don't see the point in devising scenarios where they are gamed. A better metric imo for a tax system is seeing how much of the tax burden rests with people who work for wages vs people who own capital and comparing that to their proportion of the total wealth.

dzhiurgis 2mo ago

Because it’s an oxymoron.