Eliminating inequality of taxation means flat tax instead of progressive tax. That would require either substantial reduction of the government expenses or substantial raise of the taxes for low incomes. That probably won't be very popular.
"Inequality" here is a weasel word, because it sounds bad without further argumentation.
The argument for progressive taxation is that the same tax rate is a far lesser burden on someone who makes more than on someone who makes less. If one agree with that, then progressive taxation would seem to be fairer. Of course "fair" is entirely subjective.
I agree it is a weasel word. If you argue for progressive taxation, you should not say it eliminates "inequality" - you should say inequality is awesome. You can't argue both for equality in taxation and progressive tax at the same time - they are contradictory by definition.
Buying a SUV -> You pay 10,000 USD in taxes.
Buying bread -> You pay 0.01 USD in taxes.
We could get rid off income tax at all and just increase the VAT to ~20 - 50% depending on the type of the product. This way it is almost impossible to cheat. Solving taxation for corporations still an issue though.
Now, define "luxury items", while considering e.g. that in the UK there's VAT on things like tampons (though at the reduced 5% rate), while e.g. imported luxury meat is zero-rated because its food.
It's an incredibly complicated tax to apply, because the rules tend to grow to deal with more and more corner cases.
For example: Are jaffa cakes cakes or biscuits? It took a lengthy court case to determine that they are in fact cakes for the purpose of UK VAT [1] [2].
The reason for this case was that cakes are exempt from VAT as food no matter what, while biscuits are zero-rated in the UK only if they are not covered in chocolate. In the latter case they are considered confectionery, which is standard rated. Here's more on the complexities of this classification [3].
I agree with you, when it comes to applying law to real life it is usually lengthy and pricey process. We should just use a better legal system where these things are not up in the air. You can complicate life with broken legislation, just to keep lawyers busy. You could also just ask: do we need a lawyer to determine that jaffa cakes are cakes or biscuits, or we can pick one and go with it.
On the other note on VAT categories: how about collecting data and letting machine learning decide what is a luxury item? We have excellent clustering algorithms that can find clusters in data human has no chance to find. Lets apply that to purchasing habits and figure out what sort of clusters we have out there, and lets decide how much VAT you pay based on that.
Laws are supposed to be somewhat stable though, so having to update tax systems based on evolving patterns of what rich people are doing kind of breaks that.
The classic UK example is dried fruit. If it's bought in the cake decoration department it's 0% VAT, from the home brewing department 20% VAT.
Also for some items such as gift baskets the food is 0 rated but the basket/bowl is rated at 20% and the VAT is proportionally allocated. (I can't remember if it's cost or sales price)
This is a dramatic over-simplification that ignores what is actually a cascade of exemptions that leads toward a similar tax-law morass that we already have.
Now, fend off the numerous attempts to have goods moved to a different category. We have enough trouble with "prepared food is taxed but raw food isn't".
For what it's worth, it's hard to see a Land Value Tax as being unfair, it's extremely hard to hide your taxable assets, and it works well for people as well as corporations.
Land Value tax can be extremely cruel if you happen to be poor living in a neighborhood that suddenly became popular. You are basically forced to sell your home (also not in the best of positions - you need to sell fast and can't wait out for the peak price) and move out because you can not afford to live next to some rich person. While income tax and VAT are proportional to what you earn and consume, and can vary easily with income/consumption level, changing housing is much harder, and can put people in very bad situations through no fault of their own.
I would say that this argument seems to imply that no neighborhood should ever grow (for its existing residents would be priced out.)
This, however, is a fallacy-- the higher valuation of the land implies a larger return on the land, consistent with increasing the amount of people who can live there. (i.e. replacing a small house with an apartment building.) This allows more people of modest means to live in this neighboorhood, instead of less.
Compare to the Palo Alto model, where land never appreciates in taxable value-- people are able to stay in their home, but only those who were lucky enough to buy at the right time. The overall capacity of the city does not grow, and people are priced away from buying into the city.
Land-value taxation has much better incentives. Income taxes provide an incentive to be "poor", while land-value taxes provide an incentive to not use valuable space.
+1 because you're right about the importance of distribution.
My family are inflation "refugees". It's bad in of itself.
I agree that the distribution of the money is the worse part of the printing press. Giving money to soup kitchens is not as bad giving it to upgrade your military equipment. But, lets not kid ourselves. The central bank is a very powerful instrument of control. The powerful are hardly going to relinquish it!
I agree in theory, but in practice, it's impossible unless the entire world agrees on the same VAT rules, otherwise shopping across country barriers is bound to happen.
The problem isn't (just) different rates for different incomes; it's how people of lesser means are less capable of setting the complicated structures that can make them technically owe less money under the definition of taxable income used by the tax code. A flat tax doesn't change that.
