That said, agree with your main point that making BI deductible from [mostly] retained existing benefit entitlements is the least messy way of introducing it, but it also makes it more politically difficult since it's paid for purely by tax increases.
Now perhaps a consumption tax combined with a large capital gains tax and inheritance tax -- to keep taxes going in the oligarchs economy AND the regular economy, and prevent capital from being tied up between generations in the least productive way possible, then you might get some of them on board.
What about the tax of inflation that serves to redistribute wealth from savers to debtors? (middle class -> government)
Also interesting how you know better than others how they should arrange their financial lives. Would like to hear your thoughts on the "productive ways" the "oligarchs" could better deploy their capital.
The broader they are, the more likely liberals are to oppose them, and oppose expanding them. Replacing the progressive income tax system with something regressive isn't something that's going to get support on the left.
> Gas tax? Hugely regressive.
But very narrow.
> Wouldn't liberals support additional carbon taxes?
Many liberals support the concept of carbon taxes as a behavior control mechanism, but not as the main way of funding government, and many raise concerns about the regressive impact. But, with them, the goal is to limit the thing being taxed and fund efforts to improve our ability to avoid it, not be the primary funding method for government.
> Value-added tax?
Virtually all the support I've seen on this in the US is on the right (often competing against flat tax proposals.)
> What about the tax of inflation that serves to redistribute wealth from savers to debtors? (middle class -> government)
While the classical middle class (e.g., Marx's petit bourgeoisie) are net holders of assets, the "middle class" as the term is used in modern discussions in the US (which is largely the middle income segment of wage laborers) aren't really net savers.
With the goal of eliminating carbon use (and through this, eliminating the carbon tax), yes. The key understanding is that destroying the environment is a significantly worse problem than a regressive tax.
And destroying the environment also has a highly regressive impact; The impact on livability is not uniform, and people that can afford to relocate will have a much better time of it.
Apparently obesity and diabetes hit lower-income families disproportionally as well http://www.livescience.com/37923-type-2-diabetes-low-income-... (who would have thunk), but we can always create a government program to conduct more research on causes.
What liberals aren't likely to support is replacing the current federal tax system with a consumption tax. Making it much more progressive and including a consumption tax alongside, they might, but probably not (just because that might look like what exists in some more leftish European states, there are path dependencies.)
So the proposal is to combine something like VAT with a basic income.
Doing that would cause low income people to have a negative effective tax rate (basic income exceeds taxes), low-middle income people to have a near-zero tax rate (basic income equals taxes), high-middle income people to have a moderate tax rate (taxes exceed basic income by a little) and high income people to have a higher tax rate (taxes exceed basic income by a lot).
In what sense is that regressive? It's the purest form of a progressive tax system. It even has a built in social welfare system for low income people.
The fallacy which is usually put up against this is that the super rich don't spend as much as they earn. The problem is, that's not how income tax works either. Bill Gates doesn't have to pay tax on the appreciation of Microsoft stock until he sells the shares and he doesn't have to sell the shares until he wants to spend the money. "Super-rich don't pay tax on money they don't spend" is the status quo.
And consumption taxes benefit debtors at the expense of creditors. Income tax makes the debtor pay back the debt with after-tax dollars. Consumption tax causes the creditor to be paid in pre-tax dollars.
Only if you ignore estate taxes...which FairTax eliminates.
For the rich (defined here as anyone with enough wealth that, if they don't spend it down, they will face estate taxes) they either have to realize the gains (and be taxed) and spend down or leave an estate which will be subject to estate taxes, giving them a maximum time window on taxation equal to their lifespan.
With "FairTax", which eliminates estate tax and goes to a strict consumption tax, there is no such maximum window.
> And consumption taxes benefit debtors at the expense of creditors. Income tax makes the debtor pay back the debt with after-tax dollars. Consumption tax causes the creditor to be paid in pre-tax dollars.
Because it also changes the cost structures on which debt is occurred, this only is meaningful as a one-time effect on debts that exist at the time of the transition to a predominantly-consumption-tax system, not as durable feature.
I just want to make one glib comment here about liberals and regressive taxes.
The Northeast is generally thought of as the most liberal part of America (aside from coastal California maybe). So why is it that I've seen far more toll roads and bridges there than in any "red state"?
I think some liberals make some good points about regressive taxes, but in practice, it seems like the liberals who actually get to power just love them.
I sure don't think of the northeast that way. I see it as fairly conservative both in politics and business. One data point is that it wasn't anywhere in the northeast that first legalized weed. It was Colorado and Washington, followed by Oregon and Alaska. Another data point is that people wear jeans or shorts at work in Silicon Valley (or Socal, Oregon, Colorado, etc) whereas they're far more likely to be required to wear suits in the north east.
The northeast is very urban, which has some overlapping effects with but is still very different from actually being liberal. Change is mostly driven by the west. It's just that the change reaches the dense cities of the northeast more quickly than the rural areas in between.
Because the Northeast was also the most heavily developed area of the country before the Interstate Highway System came about with a funding system that made non-toll roads the norm for new limited-access highways (funding rules which have since changed, weakening the financial incentive against new toll roads.) Modern political orientation has little to do with it: outside the Northeast, the people trying to introduce toll roads where they haven't been in the past are conservatives, the people opposing them are liberals.
Then, when you realize that toll roads are correlated with population density, perhaps you could realize that toll roads are then only also correlated with politics of state, not caused by them.
For example: If liberals loved toll roads, then California, Oregon and Washington would be full of them. But only the NorthEast is, right?
So your hypothesis falls apart here anyway.
Also how is taxing labor in any way liberal?
And for your last question:
1. What is your working definition of liberal(positive vs. Negative freedoms)? 2. Income tax taxes... Income. Not labour. Ideally not discriminating between capital and labour income.
Consumption tax paired with a BI would significantly raise the offset at which it starts to affect people.
Things that hurt the middle class much worse than a consumption tax are an income tax that is a percentage and continually increases in that percentage until the percentage caps at the point that most people would call "incredibly wealthy" (IMO).
The perk to something like a Fair Tax is that it's also an economic solution to illegal immigration. If you're in the country, you're paying taxes. If you're legal, you're getting the BI/stipend. If you're illegal you are basically paying to be here. It guts a big portion of the cost argument.
A FairTax + Basic Income hybrid solution could solve a vast majority of hotly debated issues in this country.
Basic income is a conservative proposal (now gaining support among us liberals). My trog relatives are pimping the idea to me, a screaming pinko socialist hippie.
The conservation appeal, rationalization of BI is fairness. It lifts the floor for everyone, doesn't reward cheating, doesn't thwart personal initiative, etc. Being easier to admin is a bonus.
Uh, what? In general conservatives consider basic income as welfare/wealth redistribution and hate the very notion of it. Just because some of your conservative relatives like it doesn't make it a conservative thing, it's very much a liberal policy, not a conservative one.
Completely aside from the other response, this point is just...wrong. The vast majority of hotly debated issues in this country are not hotly debated because people share a concern but are divided on the best way to address it, such that there is some policy solution that exists which could "solve" the issue. They are hotly debated because people disagree on the first principles of what goals we should seek, not the mechanics of how to address them.
As well as the obvious culture-war issues where this is the case, this is true of much of the immigration debate, many economic debates (where fundamentally clashing ideas of what constitutes "fairness" that should be sought exist), and so on.
That's not rebranding basic income to appeal to people on the right. That's rebranding "FairTax", a right-wing proposal, with fairly niche support on the right, despite a small group spending lots of effort trying to promote it, as basic income. Presumably, to gain some support on the left for FairTax. But Basic Income is also a fairly niche idea, and the people that do support it tend to have a fairly specific idea of the features they support and why, and not just be attached to the BI brand, so rebranding FairTax as BI probably won't get you support from left-wing UBI fans, for whom the tie to a progressive income tax is pretty central to their support (though there's probably some on the left who support UBI who would prefer moving to a Georgist Land Value Tax.)
There's nothing there getting you bipartisan support.
> Things that hurt the middle class much worse than a consumption tax are an income tax that is a percentage and continually increases in that percentage until the percentage caps at the point that most people would call "incredibly wealthy" (IMO).
How does that hurt the middle class? (And, incidentally, are we using middle class in the common modern media sense of middle income workers or are we using it in the classical sense of the petit bourgeoisie? Because it makes a pretty big difference in evaluating claims about what hurts them, and to how important that is -- how it affects the latter will, of course, vary from person to person.)
> The perk to something like a Fair Tax is that it's also an economic solution to illegal immigration.
No, its not. (OTOH, the 2001 and 2009 recessions, and the poor distribution of the gains between and after them, was an economic solution to illegal immigration. But a solution worse than the problem...)
> If you're in the country, you're paying taxes.
True without the hilariously misnamed "FairTax".
> If you're legal, you're getting the BI/stipend.
Without the "FairTax", if you can establish that you are legally present (and, for some of these, legally eligible to work, which aren't the same thing) you have access to a variety of public benefits, perks, and, well, the right to work that aren't available if you can't establish that.
This hasn't been true in decades. The people ("millionaires") who make ~150K/year pretty much spend all of it. It's the multi-millionaires and billionaires who make millions a year and don't spend that much, but those are the same people whose "income" is mostly unrealized capital gains. Switching to a consumption tax wouldn't materially reduce their taxes because they're not paying hardly any taxes as it is. (And getting rid of capital gains tax would increase economic efficiency because it currently prevents people from selling shares in order to buy better shares unless the advantage of the new shares can overcome the taxes due from selling the existing ones. Which would grow the economy and increase government revenue.) It's conceivable that a consumption tax would cause the super-rich to pay more taxes, because if you want the yacht you have to pay the tax, but there are currently a lot of tricks you can play to convert stock into stuff without paying tax, like selling only the shares that have decreased in value.
The best way to think of a basic income is as a fixed tax refund. A middle class person who pays $10,000/year more in taxes to fund a basic income and then gets the $10,000/year basic income it isn't actually any better or worse off than before.
Getting rid of capital gains tax to encourage reinvestment is kind of silly. Heck, you could tax capital gains as regular income, and still eliminate any drag on reinvestment by allowing deductions for investment so long as the investments for which such deductions were taken were treated as having a zero basis value.
> It's conceivable that a consumption tax would cause the super-rich to pay more taxes, because if you want the yacht you have to pay the tax
Not really. You just structure the transactions to avoid what is taxable, e.g., you buy the yacht at a low nominal price and simultaneously (and completely coincidentally) by some financial investment not subject to consumption tax from the same party at an inflated price.
Anyone who can avoid paying taxes on their income in an income tax system can avoid paying taxes on it in a consumption tax system. (If you have an "unconditionally tax every transfer of money between two parties" system, it gets harder, but that has all kinds of downsides.)
> but there are currently a lot of tricks you can play to convert stock into stuff without paying tax, like selling only the shares that have decreased in value.
Sure, if you only ever sell shares that have lost value, you can avoid paying the (low) capital gains tax, at the expense of always losing money.
That's not a way to maximize your net, after taxes, utility, but if you want to lose money just to avoid paying a small portion of the gain in taxes...
> The best way to think of a basic income is as a fixed tax refund.
I think you mean "fixed refundable credit" rather than a "fixed refund".
Which is a de facto consumption tax because it means you only pay tax when you sell securities without buying other securities, which you only do when you want to spend the money.
> Not really. You just structure the transactions to avoid what is taxable, e.g., you buy the yacht at a low nominal price and simultaneously (and completely coincidentally) by some financial investment not subject to consumption tax from the same party at an inflated price.
As opposed to the current system where you work for somebody for a low nominal wage and simultaneously (and completely coincidentally) they "sell" you a car for one dollar. Which in either case will get you prosecuted for tax fraud.
> Anyone who can avoid paying taxes on their income in an income tax system can avoid paying taxes on it in a consumption tax system. (If you have an "unconditionally tax every transfer of money between two parties" system, it gets harder, but that has all kinds of downsides.)
This is not actually that hard. You make the amount of the consumption tax based on the market value of the purchased item rather than the amount you nominally paid for it, with a presumption that the amount you paid is the market value, which the IRS can easily rebut when you're claiming the market value of a yacht is $20.
> Sure, if you only ever sell shares that have lost value, you can avoid paying the (low) capital gains tax, at the expense of always losing money.
It's not actually losing money. You invest in a diverse portfolio of stocks, some go up, some go down, some stay the same. When you want to spend some money you sell the stocks that have underperformed rather than the stocks that have performed well, which (at the risk of selling low) is plausibly what you want to do anyway, and then you pay no taxes because you realized no gains.
Even if all your stocks went up and by the same amount, if you want to spend 1% of the total assets then you still only pay tax on 1% of the gains because the rest of the gains are still unrealized. So it's already effectively a consumption tax as long as you can avoid changing what you're invested in.
Except that it's a consumption tax that taxes only the spending of interest (and earned income) but not principal, which seems to be to the benefit of people with more wealth.
With that said, the FairTax is bad for other reasons -- by concentrating all your taxation on something that's relatively easy to hide, you massively increase regulatory and compliance costs. Imagine the blooming industry in recharacterizing consumption purchases as investment purchases! (For the rich, "sufficiently advanced investment is indistinguishable from consumption".)
