[Chugalug] Did you hear? The IRS wants your Bitcoins!
Joseph Simoneau
joseph.simoneau at gmail.com
Wed Mar 26 16:19:50 UTC 2014
The math is just plain wrong because raw numbers discount the actual value
of money (purchasing power) at different income levels.
If you take home a billion a year (or any substantially huge quantity), you
can lose a Benjamin on the street and not care.
If you are in a situation where your income (counting government
assistance, charity, etc. as income) can cover your minimum expenses but
let's you save zero dollars, losing that $100 bill could break you.
In terms of how it actually affects people, X% of a huge salary is less
than the same X% of a small salary.
Consumption based taxes, flat tax rates, etc. are evil.
-js
On Mar 26, 2014 11:50 AM, "DaWorm" <daworm at gmail.com> wrote:
> 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.
>
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