Saturday, April 02, 2005
Consumption Junction
Jody has an interesting post below proposing a national consumption tax instead of an income tax, and it's a better way of phrasing the argument than I've seen before. I still think it's a silly idea; before I go into why, let me clear up one thing; in the comments, I wrote "If I'm poor, and I'm paying 15% in tax right now..." Which is not the same as saying "I'm poor, and I'm paying 15% in tax right now." My effective tax rate, when all state and federal taxes are added in, hovers at about 40%. So even though I live basically hand-to-mouth, I would benefit from the plan Jody proposes. I still oppose it vehemently, though, and here's why.
On a slightly unrelated topic, I'd like to see Jody's Social Security post before Bush's Social Security phase-out has been completely abandoned.
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- A flat consumption tax would hurt domestic sales and create a huge black market. Mexico is two hours drive for me. If I can save 23% on a plasma screen or other high-ticket item, of course I would make that drive. This is also true for cars--you register them with the state; would you have to prove you'd paid federal taxes to register a car with your state government? Talk about a regulatory nightmare.
- As the flat tax FAQ says, "most people pay more than 23% already." That's true. But the people who pay less than 23% are the ones who can least afford to pay more. To pay less than 23%, you have to be really, really, heartbreakingly poor. But you still have to eat.
- Patsy posted in the comments, "I can't understand why someone is poor to begin with." I'm going to give her more credit than she deserves and assume that this is rhetorical nonsense, and not a lack of imagination. She makes an exception for "students and apprentices," who are allowed to be poor. Well, what about them? They still have to eat. To your list of "forgiveable poor" I would add: failed entrepreneurs, people who've had a serious medical emergency, people who've been laid off, single parents whose spouses don't pay child support... Blaming the poor is a canard, and a heartless one at that. If your distaste for poor people leads you to support this kind of plan, well, I guess it's your nature. But I'll fight you tooth and nail; I don't want to live in a country where that's the norm. Note that I don't attribute these motives to Jody, or Linder, or anyone who doesn't explicitly state them.
- As with all social services, I think it is in my self-interest to not make things harder on the extremely poor than they already are. You can walk from my neighborhood to Inglewood in about an hour. It would take a little more time if you were setting everything on fire while you did it. At the height of the Los Angeles riots, fires stretched from Long Beach to Hollywood. That's an hour-long drive, without traffic. Regressive taxes that make things worse for the underclass are a hypothetical evil for people in small towns. But in L.A., the worse things are economically, the worse crime gets, and the more likely I am to get shot.
- The black market that's already a big part of our economy would be hurt. The real price of produce, for example, would go up; right now, fruit is picked mostly by undocumented illegal immigrants. Who are also, at least in Los Angeles, responsible for a big part of the service economy. I think that's a mess, and I don't really want to get into an immigration argument (I'm for open borders, basically). But even if you're a black-market worker, so to speak, you still buy your food and housing on the 23% taxed market. Anyway, point is if there's suddenly a 23% sales tax, you have to pay migrants more, or they'll starve, or stay in Mexico. Odds are they could make more money in Mexico smuggling consumer goods across the border, anyway. Which leaves you with the option of hiring American citizens, which means the cost of food would go up even more. End result of that, I think, would be to make the U.S. even more dependent on imported food than we are now.
- Sending people a check for taxes paid on basic expenses every month sounds fine in theory, but in practice you couldn't do it without a much better poverty index, keyed to real costs and including rent. In my city, $1000 is an average rent for a one-bedroom apartment. For a family, say in a 2-bedroom, you'll pay probably about $2000. I'm not talking about luxurious places here, I'm talking about what you'd have to call lower-middle-class housing. So I'd expect to pay an extra $250 a month in tax on my rent; I'd want that back. The last time I heard anything about rent elsewhere, it was hovering around $400 a month (in Knoxville). That's a huge difference, and it's one that, again, would make the most difference to the urban poor.
On a slightly unrelated topic, I'd like to see Jody's Social Security post before Bush's Social Security phase-out has been completely abandoned.
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