[Chugalug] Did you hear? The IRS wants your Bitcoins!

DaWorm daworm at gmail.com
Wed Mar 26 15:49:27 UTC 2014


On Wed, Mar 26, 2014 at 10:22 AM, William Roush <william.roush at roushtech.net
> wrote:

> Consumption based taxes are extremely regressive, you take most of the tax
> burden from the richest in the country and distribute it between the lower
> and middle class.
>
>
They don't have to be.  Exclusions on such things as food items and
clothing can be made, as well as the so-called "refunds" where everyone
gets a refund equal to the tax burden of the poverty line or some other
arbitrary number.

Also, I can make the argument that consumption taxes are not regressive.
 It goes something like this:

Let's say I make $50,000 and there is a 10% national tax.  I spend all of
my money every year, so I pay $5,000 a year in taxes.  So my effective rate
is equal to the nominal rate of 10%.

Let's say you make $500,000, and only spend $300,000 every year, so you
only pay $30,000 in taxes.  That would make your effective tax rate only
6%.  So this must be regressive, correct?

But, of what use has the remaining $200,000 been put?  If it wasn't spent,
it did you no good.  It wasn't used to consume any resources.  Let's
further say that you invest that money, which contributes to the economy.
 And even further, you make a nice 10% return on that $200,000 so that now
you have $220,000.

To make the math simpler (I don't want to do compound interest), let's now
say you retire, and you begin spending your savings.  So you eventually
spend that $220,000 and pay $22,000 in tax on it (again, ignoring compound
interest, with which you would continue earning more on the unspent balance
each year, resulting in a higher amount of tax paid).

For your initial $500,000 in earnings, you have now paid $55,000 in taxes,
which is an 11% tax rate.  Not regressive, but progressive!

Of course this assumes that you will eventually spend all that you've
earned.  For an individual, that may not be true, but that money will be
left to heirs (assuming estate taxes don't give most of it to the
government), and they will spend it, or their heirs, and so on.  That's
what makes governments (and business) different than individuals, they last
much longer than a lifetime.  In the long run, the government will get its
money.

Jeff.
-------------- next part --------------
An HTML attachment was scrubbed...
URL: <http://chugalug.org/pipermail/chugalug/attachments/20140326/8ce3d654/attachment.html>


More information about the Chugalug mailing list