A wealth tax isn’t just a sensible funding mechanism. It should be framed as reparations paid out by wealthy elites who have plundered the nation’s wealth. In some ways, it doesn’t matter if we actually pass a wealth tax, so long as we get more people moving in the direction of supporting redistributive justice and punishing the rich. Which doesn’t mean guillotines, but could lead there if people are angry and nothing is done.
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Yeah this is what I didn’t want to get into explaining but I’ll do my best.
So the way you’re viewing it now VAT is a consumption tax, but that’s not actually what it is. It’s a tax on gross profits. There are different types of industries with different kinds of cost structures and different ways of setting prices.
There are firms with relatively low margins that make their money by moving absurd volumes of product. Examples include Walmart, Grocery Stores, etc. These types of firms have crazy COGS relative to their top line and 1) be paying relatively little in VAT and 2) be passing on their VAT tax costs to consumers. This is because they usually live in highly competitive environments where margins are low and they generally can’t absorb the hit. Their prices are set based on what other firms in their space are charging, and those prices are tightly linked to costs. We’ll call these Type A firms.
The next group are firms that provide higher margin more unique products. They generally have a more monopolistic level of control over their markets and charge based on how much demand there is at a given price point. A lawyer doesn’t charge 200/hr because he absolutely wouldn’t work for 199 he charges 200/hr because there are enough clients willing to pay 200/hr that he can stay sufficiently busy and it maximizes revenue. Similarly tech firms with zero marginal costs set prices based on how much demand they can generate at that price level and they are trying to get maximum revenue by carefully tuning this number. We’ll call these Type B firms. Other examples of type B firms include luxury brands, specialty machinery makers, and frankly way more than I can think of off the top of my head. These types of businesses also tend to produce most of the uber wealthy because they are straight up inherently superior to type A businesses in a vacuum.
Type A firms will pass on their VAT costs to consumers. Type B firms will not, because they were already charging the maximum price at that demand point, and the price they charge is totally divorced from their cost structure. Adding a new 10% cost to their gross profit doesn’t change all that much for them except that they get a bit less money. They don’t gain anything from passing it on but less revenue and usually the same cost structure as before.
This is why a 10% VAT tax doesn’t result in 10% inflation. In the US the most problematic sources of inequality tend to be type B firms. Show me an industry that is driving inequality up and I’ll show you a type B firm usually. Type A firms sins usually tend to be in the ‘we did some awful thing to cut costs because our industry is insanely competitive’ vein, and they are meaningful particularly when the type A firm is large and uses its size to abuse vendors and employees… but make no mistake at the systemic level the Type B’s are leading the charge on inequality. They are going to eat the entire VAT and their VAT bills will be damn near the full rate. Google is not going to start charging more for ads because of VAT.
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I hear this a lot. But if this is true, why are the super-wealthy so afraid of one being implemented?
And here I was thinking a 10% VAT would mean 10% inflation…
Yeah, no.
Because 25% of the expected amount is still a fuck ton of money. Look at what they did to the inheritance tax lol. They basically never paid that at the nominal rate either.
Wealth taxes have been done in Europe. They raised nowhere near what they promised… in fact the amounts raised were pretty trivial in the grand scheme of things. VAT taxes on the other hand raise pretty much exactly what they are supposed to because they are incredibly hard to evade.
We live in a world with an incredibly developed tax avoidance/evasion infrastructure. If you want to tax the rich you have to be more creative about it than saying ‘I’m going to tax your wealth’. That creates more problems than it solves. You have to find some step of the process where their money is exposed and get them there.
The amount that the producers and consumers of a product pay is different between a VAT and a consumption tax because of gross margin as you stated. The distribution of the burden between producer and consumer, however, is identical.
LOL- you are literally making a right wing argument against UBI.
Would you stop working if you were getting UBI?
Also a VAT tax can exclude stable items and it can be higher on luxury items. There are ways to tailor it to where it isn’t as regressive.
Under this plan the poor and middle class are net gainers and the rich are net payers.
I do worry about the poorest among us. I also worry about the millions living in poverty now with no benefits. UBI will plug those holes and also make families and communities stronger and will allow for more people to help their neighbors.
VAT is a separate issue, but anti-VATters should consider that pretty much all the other wealthy countries in the world have it and when America is exceptional about something it is usually wrong. The USA is the bastion of fair taxation compared to Denmark?
But most states have a sales tax anyway (progressive states generally having the larger sales taxes). Maybe UBI should just be handled by the states, cities and counties.
I’m not anti-VAT. I’m anti-Andrew Yang.
ETA: the discussion of VAT is within the context of it funding what is supposed to be a revolutionary social welfare program.
Does it not give you any pause that Yang and his UBI appeal so strongly to people who otherwise oppose social welfare programs and the concept of economic justice?
I apologize for my general inability to put thoughts into words but I feel like UBI is the anti-social welfare social welfare program and that its appeal is largely based on right-wing rhetoric surrounding welfare. I thought I made that clear in the opening of that post.
He voted for him in 2016 so I am thinking he will eventually endorse Bernie.
He owes it to his supporters to stay in for the early states. There are a lot of people canvassing, phone banking, and text banking plus a lot of people who donated to him.
I would be pissed if he dropped out now even though I believe he has already won. UBI is actually in the national conversation.
Bernie supports UBI, he just doesn’t think America is ready for it yet. Does that give you pause?
I think that is largely true and some people advocate UBI for very cynical reasons. “This is your last chance. If you blow this $1k you get to die in the gutter.”
No, it doesn’t. Bernie’s track record of where he stands on economic issues is clear.
Yang, meanwhile, reeks of church of perpetual growth.
How exactly does he reek of the church of perpetual growth? His whole campaign is about separating human value from economic value… and about changing our economic metrics to match that. He’s done more to damage GDP as a measurement of economic well being than anyone in recent memory.
No offense dude but you smell to me like someone who has done minimal research that mostly consisted of reading attacks on a candidate… and then parroting them here. You haven’t considered how he might be right for even a second.
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“He’s done more to damage GDP as a measurement of economic well being than anyone in recent memory.”
What? This level of sycophancy is supposed to be Bernie’s thing.
So you haven’t actually done any research at all. Gotcha. This site doesn’t ban people so I have to ban people myself. Consider thyself banned from my own personal version of unstuck.
What hypothetical bollocks is this? I ran a business for 10 years in the UK, still have family with retail shops. IME every business is scrupulous about passing on VAT to the customer. How many businesses do you think can just eat 20% off their gross margins and stay in business?
VAT is a as regressive as it seems and its a drag on the European economy and played a significant role in the drastic increase in inequality there over the last 40 years.
And the idea that you shouldn’t tax the rich because they’ll evade it is nonsense, too. That’s what enforcement is for. Lock a few of them up and they’ll fall in line.
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You were a type A business obviously. Nobody yet has managed to actually enforce shit and we certainly won’t be the first. Our entire political system is 100% compromised.
Also VAT to fund UBI is pretty different in impact than VAT to fund everyday government business. Still they do it all over Europe and honestly Europe is way better on inequality than the US. The UK is worse than the rest of Europe, and the US is worse still.
Do you at least have a scholarly citation documenting how companies generally just take most of the VAT out of their profits rather than usually passing it along to the consumer in toto? Because every time I’ve paid a VAT as a consumer, it sure as fuck looks like I’m paying the whole damn thing.
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