No. of Recommendations: 15
I think a broad VAT or national sales tax is regressive. A flat tax that hurts those who consume a bigger proportion of their income, i.e. the poor.
Not the one I mooted.
First, it's proportional to wealth to a first approximation, as rich people spend more on goods and services than poor people. Again, to a first approximation, that doesn't sound unfair.
("regressive"/"progressive" are a propaganda terms in taxation policty which I avoid. "Progressive" is usually used to advocate something like quadratic taxation in tax versus wealth while sneakily connoting modernity and good moving forward).
Next, the bottom quintile of households would be richer, not poorer, as they would get more in the $600 flat rebate than they would be paying in incremental tax. There would also be pretty minimal tax for the second-from-bottom quintile, for much the same reason: the rebate would be somewhat material relative to the tax paid.
And lastly, as there is no VAT on food in my mooted proposal or almost any version in use that I know of, and since poorer households spend a lower fraction of their income on food than richer ones do, the tax paid would be greater-than-linear with income.*
VAT is like what they say about democracy: it certainly has its flaws, it's just better than all the other things that have been tried.
Jim
* The greater-than-linearity would bend down slightly at the top end, as there is a greater propensity to save versus spend among the very wealthy. Still, other than Mr Buffett, rich people generally spend a whole lot more than poor people do.
