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Consumption taxes are fine? No, they're not

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Helsworth
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Post: #1
Consumption taxes are fine? No, they're not

Very disappointed with Bruening's reasoning here.
http://mattbruenig.com/2017/04/05/why-co...-are-fine/

I reply to him via twitter the following:

--- Matt, by regressive, critics mean that the levy is the same for the rich & poor. The rich won't feel the tax, the poor will.
Also, since you're talking about the US, US Federal Taxes don't fund anything. They simply create demand for the US dollar.
State governments, unlike the Fed Government, are constrained in their spending by what they can borrow, tax, and receive from the Fed Gov.
So if you want state governments to levy a 10% VAT, that's fine. But there's absolutely no reason why the Fed Gov should levy a VAT.
If you want to tax the rich, levy a progressive tax on all incomes, that only the opulent minority will qualify to pay. ---


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06.04.2017 08:47
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Ajay Alcos
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Post: #2
RE: Consumption taxes are fine? No, they're not

As you've pointed out to Mr. Bruening, it is evident that VAT or GST (depends where you live) punishes those of lower income brackets far more than higher-earners and overall discourages consumption in general (barring other factors). Nonetheless it is a lucrative revenue stream for governments but one that shouldn't be heavily relied upon considering the complicated effects it has on distribution of income. Really there are other means for governments to generate revenue. Compare Norway to Australia for example. Both countries have significant reserves of natural resources (petroleum for Norway and mining & agriculture for Australia). Unlike Australia which briefly toyed with a mining tax (which unfortunately was too little, too late since its mining boom had long expired); Norway instituted a super-profits tax for its petroleum and mineral industries long before the GFC when the world economy was still in its high-growth mode.

They fruitfully invested the surplus proceeds of that (and other) revenue into a sovereign wealth fund which covers and compensates for current & future pensions for its citizens. The fund I should is also available for use towards investing in future infrastructure development. Australia on the other hand simply used its "then" surplus to create tax cuts and credits for already inundated and established industries, in particular the mining sector. So whereas now Australia's total debt is creeping slowly towards $1 trillion USD, Norway's wealth fund is nearing that same number. Of course Australia and Norway alone are not representative of the situations of other economies, considering the fact that both are blessed with access to such bountiful resources. Nonetheless the U.S. and Europe could take note of Norway's example and consider imposing similar super-profit taxes on particular burgeoning industries (depending on how well established) and higher income brackets.
Here a few select articles for those interested for more info:

http://www.petermartin.com.au/2010/07/me...s-set.html

https://www.theguardian.com/commentisfre...ing-wealth

http://www.abc.net.au/radionational/prog...th/7797560

06.04.2017 12:01
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Helsworth
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Post: #3
RE: Consumption taxes are fine? No, they're not

Whether he realizes or not, Bruening is actually making the case for flat taxation, invoking that a person's tax obligation is proportional to his or her spending. So the rich pay more, the poor pay less. He is saying that under a 10% VAT, a rich person's consumption tax bill is higher than a poor person's consumption tax bill. He thinks this is an argument against those who are criticizing the fairness of such a tax. Using this logic, that a flat VAT creates proportional equity, we can extrapolate it to the income tax. If you pay 10% income tax on a million dollar income, you pay more than someone who has a 10K income. I don't see Bruening arguing in favor of a flat income tax. He has major flaws in his logic. Oswald Mosley, for instance, recognized that taxing the idle savings of the rich isn't conducive to control inflation, so he proposed progressive consumption taxes instead. To be fair, Mosley knew more about economics than Bruening. I had a brief exchange with him on twitter about a year ago regarding taxation under a free floating fiat regime. He seemed meek and open about it. Now I find that he still writes this deficit dove bullshit on his blog... I'm no longer following him on twitter.


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06.04.2017 13:50
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