The solution is to tax assets directly (i.e. the asset owes the tax) in combination with large consumption/VAT/GST tax and not tax income at all. These two taxes would be very difficult to avoid and not bias against investment verses consumption (provided you got the mix right).
Why would it affect the lowest classes more? You can apply any per person payment you like to change the effective rate of any consumption tax. For example you could give everyone a $10,000 cash payment/ tax credit / call-it-what-you-like every year. This would fix any regressive consequences of a large consumption tax.
As for taxing assets directly, it is impossible to hide most of them (land and buildings are very hard to hide). Even things like shares and bonds are near impossible to hide. About the only thing that could be hidden are things like diamonds, but these are such a tiny amount of all assets that it would not be important.
Lets get away from taxing productive activities (i.e. income) and start taxing consumption and hoarding.
You can't hide anything as we speak, when you sell your house you pay capital gains taxes on it if it increased in value.
Same goes for any other item.
Taxing "wealth" would means that the wealthy would keep being wealthy but the poor can never gain any wealth, this is what is effectively has been going in Europe since WW2 with the exception that there is a subclass of the "wealthy poor" in Europe, those who have inherited property and titles but effectively have no cash to uphold them.
Under this system you would penalize people who have savings, people who invest, and more importantly people who need to consume "more" such as people who are having kids because they need to buy a bigger house or a bigger car.
Under your system you also encourage grey and black market trading, and secondary economies that bypass the taxation system.
Taxing income is fair because it taxes what you get, taxing wealth is abysmal because it taxes what you have.
Wealth taxation would mean that any financial crisis where people lose their job would be 1000 times worse, it means that getting sick or wanting to leave work to raise children or to help parents would be impossible, it pushes people to effectively be slaves because you don't tax what they actively receive but have a regressive exponential tax on what they've accumulated in their entire lifetime effectively you tell people do not save, do not buy something which is too big, do not retire and work all your life otherwise you won't be able to afford what you already own.
You can't strip people off property they have already own, I can't even understand how would people come to think this system of taxation is reasonable, to the point of which I am beginning to question where people who post on HN live and how do they make their money.
We already live in a society where you effectively taxed for well over 50% of your income, where to buy a house you have to be endured to a bank for decades and you want to make this worse?
1. I suggested taxing consumption and assets instead of income. Income taxes would fall to zero to be replaced with taxes on consumption and assets. You might have to pay more tax on your consumption and assets, but you would have more income to pay for it.
2. Consumption taxes like VAT are hard to avoid given the way they compound through the production chain. They really are very efficient taxes and any regressive nature can be mitigated with other transfer payments.
3. A wealth tax applied directly to the asset (the asset owes the tax, not the owner of the asset) would also be very efficient and hard to avoid. It would encourage the productive use of the asset rather than hoarding.
4. All taxation is stripping people of property they already own - income tax is stripping you of your labor after all. That is what taxation is.
5. Taxing wealth would not stop the poor from becoming wealthy. If would actually help the poor to become wealthier as the only thing they have of value (their labor) would stop being taxed.
I do agree with you that a change from an income based taxation system to a consumption/asset based system would be unfair to those that have paid income taxes all their lives and saved and are now taxed on their savings. The solution would be to have a long transition period (25 to 30 years) where each year the income tax rate fell and the consumption/asset tax rose.
All of this is rather academic anyway since the rich and powerful will never allow an asset tax to be implemented - the last thing they want is to start paying tax. As Leona Helmsley famously said "We don't pay taxes. Only the little people pay taxes."
>I suggested taxing consumption and assets instead of income. Income taxes would fall to zero to be replaced with taxes on consumption and assets. You might have to pay more tax on your consumption and assets, but you would have more income to pay for it.
No, you are missing the point you can't live in a society where you are taxed regardless of your income.
If I choose to take a sabbatical from work there is no reason for me to pay tax unless I actually earn during period.
>Consumption taxes like VAT are hard to avoid given the way they compound through the production chain. They really are very efficient taxes and any regressive nature can be mitigated with other transfer payments.
VAT is a horrible taxation system which is one of the main reasons why Europe has a major issue with taxation distribution where the lower income brackets pay considerably more than they should.
>A wealth tax applied directly to the asset (the asset owes the tax, not the owner of the asset) would also be very efficient and hard to avoid. It would encourage the productive use of the asset rather than hoarding.
We already have taxes applied directly to assets they are called capital gains taxes, the different is that capital gains are taxed when they are realized, you are suggesting a system where you will be continuously taxed regardless what you do with the item which is unethical, immoral, and an abysmal idea.
We already have issues of people who cannot afford to pay an inheritance/property tax having to effectively sell their property, what you effectively suggest will kick people off their home as their houses would become too expensive to pay tax on over the year.
You are suggesting a world in which the 250,000$ house you bought where you were 30 years old is worth 4-5 times or more by the time you are in your 60's or 70's making it unsustainable.
And you don't need to live that long as most property would increase in value faster than your income would increase which means your tax liability would grow considerably faster than your ability to pay it.
>All taxation is stripping people of property they already own - income tax is stripping you of your labor after all. That is what taxation is.
No taxation is reappropriation of a portion of the gains you receive by the collective as you receive them, no one is coming to you after 10 years and say hmppfff your TV is too nice pay more tax.
The system you are suggesting would be even worse for social mobility than what we already have, Europe is touted as some social mobility heaven which is a joke, the only social mobility is for immigrants and eastern europeans, the wealthy in Europe are the ones who have been wealthy for 500 years with almost now new wealth being created; the amount of "new money" is low to nonexistent in most countries.
And as for the Leona Helmsley quote well; kek; In the US the top 20% pay ~85% of the federal tax income tax, and have pay ~70% of all federal taxes, in Europe the top 20% pay on average 40% of the total tax revenue and that is mostly because of high consumption taxes VAT, Fuel Tax, Sugar Tax etc.
And most importantly in your absurd system when there is a financial crisis and people lose jobs they go into exponential debt for no reason, in a progressive income based taxation system at worse the government goes into debt while the people at least have a chance to remain afloat by their savings and by the fact that the have already paid forward for social programs using their income.
