[KirillAristov]

Why are you assuming they spend the money in a country where VAT applies?

Tariffs?

They're getting extra benefit out of the delayed payment to VAT -- a benefit the poor do not have, since they've no means to invest or save. They must pay the VAT now, always.

Poor people can't use banks? Really? And how does delaying payment benefit you?
No matter how you look at it, poor people will at MOST be able to pay the exact same proportion of VAT as rich people, but realistically they'll always have a higher burden. I'm still not getting how the burden is any different. Assuming all the money gets spent, and we have tariffs, everyone pays the same percent WHEN they decide to consume rather than before.

[Z2sc8gEz]

Did you even read what I wrote? That would imply the same tax rate.

A single tax bracket of say 5% is not regressive or progressive IF I understand correctly. I haven't factored in the concept that additional income could have decreasing marginal value.

Furthermore by just waiting to spend it you are sacrificing the ability to spend the money now, which is probably significant.

[heilyprollecyspor]

VAT as it is known in Britain was introduced as a progressive tax- a tax on luxuries. By extending it to nearly all sales goods its end results became regressive- anyone living hand to mouth gets shafted, while the old money who can lock estate up for generations can simply wait for a more favourable tax regime.

Now this is an actual valid objection....

On the other hand, it's more difficult to shift consumption than, eg to shift the realization of capital gains

[Andoror]

But the fact that it is easier to enforce than an income tax means that, if I understand correctly, we'll probably still get a lot less tax dodging.

And the people who conspicuously consume will get hit hardest as opposed to those who make the money they earn available for loans

EDIT: Wow BK is retarded. VAT != free lunch

[denyffishh]

Nah, I think poor people could make do with less.

Those rotten poor people, they spend so much and waste all that money! herp derp

[mikefertynnz]

EDIT: Wow BK is retarded. VAT != free lunch It is if your spending is less than 80 percent of your income.

Say I get paid 1500 a month. That's 250 dollars in taxes, so I would get 1250 to spend after taxes.

Say there was a 20 VAT on 1500 a month. I get a cheque of 1500 dollars. I would have to spend 1250 dollars a month in order for my payments due to VAT to equal the tax bite.

Now say I take that 1500 a month, and I pay 300 for rent, 200 for everything else. That leaves me 1000 in the bank, and paying a VAT of 100 bucks.

I end up 150 bucks to the good.

[turbutbamethyg]

It is if your spending is less than 80 percent of your income.

Say I get paid 1500 a month. That's 250 dollars in taxes, so I would get 1250 to spend after taxes.

Say there was a 20 VAT on 1500 a month. I get a cheque of 1500 dollars. I would have to spend 1250 dollars a month in order for my payments due to VAT to equal the tax bite.

Now say I take that 1500 a month, and I pay 300 for rent, 200 for everything else. That leaves me 1000 in the bank, and paying a VAT of 100 bucks.

I end up 150 bucks to the good.

Now repeat the exercise saying you get $300 a month, and the absolute bare minimum you need to spend to avoid dying of exposure and/or malnutrition is $300.

[Kghyutgykim]

The numbers work. why wouldn't I want an extra 150 bucks in my pocket every month.

[Hokimjers]

And they will pay VAT on that larger amount when it gets spent. I don't understand your objection here.

But in many cases it won't get spent. It goes into further investments, inheritance for the kids who live off dividends, investing/purchasing property in more favourable tax climates, etc.

I'm not inherently opposed to VAT, I'm just making the case for why it's widely considered a regressive tax. And I think 20% is a bit steep is all. I'm used to 5-7% in GST only.

[SantaClaus]

It does get spent though. That money doesn't just sit in a pile. When you invest it, it gets spent. That reduces the value of the stocks, presumably, so the cost gets passed onto the investor somehow, doesn't it?

NB: I am a noob at economics if I'm wrong please pwn me

This is only true in theory where the money never leaves a tax system with a systematically applied VAT. It also assumes the money is going to be spent, not invested where people then live off the dividends. And yes, you pay tax on the dividends you get out of it -- but the fact that the payment to the government is deferred for people who have the means means it does not proportionally impact them as it does the poor.

[KRbGA0Bg]

It does get spent though. That money doesn't just sit in a pile. When you invest it, it gets spent. That reduces the value of the stocks, presumably, so the cost gets passed onto the investor somehow, doesn't it?

Lock it up as estate. Avoid inheritance tax through discretionary trusts and gifts within the exemption rules. The estate passes from one generation to the next (or further) without crystallisation for tax purposes.

That's how rich familes stay rich. Only the little men pay taxes.

[AAAESLLESO]

It's just an expression, of course they pay some tax. But some rich people also have ways to get around paying taxes. They hire very smart people to do so.

[Kimaamighed]

This is only true in theory where the money never leaves a tax system with a systematically applied VAT. It also assumes the money is going to be spent, not invested where people then live off the dividends. And yes, you pay tax on the dividends you get out of it -- but the fact that the payment to the government is deferred for people who have the means means it does not proportionally impact them as it does the poor.

Holy ****, Asher, this concept should be completely ****ing obvious to you. We just went through this same issue with nye a while ago - do you really want to be as dumb as he was?

A 20% VAT has a precisely flat proportional impact (relative to no tax) on lifetime income, modulo income that is never spent (and is then subject to estate tax + VAT when the inheritor spends it).

[Also modulo BFB's point re: deferring until a new tax regime emerges.]

[layevymed]

Budget cuts in the UK.

Stupid argument about VAT.

Contributing something meaningful to the thread.

[CializCialiscsqw]

Holy ****, Asher, this concept should be completely ****ing obvious to you. We just went through this same issue with nye a while ago - do you really want to be as dumb as he was?

A 20% VAT has a precisely flat proportional impact (relative to no tax) on lifetime income, modulo income that is never spent (and is then subject to estate tax + VAT when the inheritor spends it).

[Also modulo BFB's point re: deferring until a new tax regime emerges.]

You seem to be incredibly naive. You're listening to theory, not reality.

It's proportional in theory. That is "obvious".

What is not obvious is reality. In reality, the deferred payment of VAT reduces the percentage of genuine income paid to VAT. The opportunity to invest the money while not paying the VAT means you will be supplementing your income further with investment income. You will have monetary gains from it, in effect.

Yes, VAT is the same % for everyone so a simpleton could conclude it is proportional. But it doesn't work like that in the real world when analyzing the big picture. In brief, the total income of rich people gets higher due to VAT payment deferral. So while the percentage is still the same, the quantity of money in the other 80% that does not get paid to VAT is going to be larger for rich people.

[Leczyslaw]

Not everyone is capable of getting it. That's okay.

[Lt_Apple]

I guess you really did not understand my post.

The proportion is always the same. But the reason why the VAT is regressive is because the real impact of it provides benefits to the rich that the poor do not get -- the deferral of VAT payment granted by investments results in real-world supplemental income not afforded to poor people. The proportion is the same, but the overall income is higher for rich people as a direct result of the deferral of VAT payments.

If you're going to be pedantic and only look at the superficial -- yes, it is a proportional tax. 20% for everyone.
If you look at it in terms of the real world, the rich benefit more than the poor.