I don’t know about you, but the unequal distribution of wealth doesn’t actually bother me at all. What bothers me is the unequal distribution of consumption.
In other words, I don’t care about your paycheck. If you’re just going to put it in the bank, knock yourself out; I hear they need the money. I sure know my own employer could use a decent loan right now.
No, the inequality I care about is practical: unequal distribution of yachts, yoga classes and Yeah Yeah Yeahs concert tickets.
That’s why I support revenue-neutral sales tax reform to include the taxation of services. It’d be the first step towards a fairer, more efficient tax system that penalizes what we don’t need — stuff — instead of what we do need — work.
Living a few thousand feet from the border between Washington (the second-highest-sales-tax state in the union, after Tennessee) and Oregon (one of three no-sales-tax states) means thinking about sales taxes a lot. And because Washington is one of seven no-income-tax states and Oregon has the highest tax rate in the union on low-wage income, it also means thinking about income taxes a lot.
Folks, I’m coming to you from the lower middle class with a strange and geeky message: if sales taxes were done right, they’d be better. And the first step toward doing them right would be slapping them on those concert tickets.
Yes, they’re regressive. Today, poor people (and comfortable people, like me) spend a larger share of their income on taxable goods than rich people. But this isn’t because rich people’s consumption is beyond our power to tax. It’s because we’ve chosen not to tax the things — entertainment, education, health care, landscaping — that rich people consume.
Buy a dumbbell; pay sales tax. Buy a gym membership; duck it.
Only three states (Hawaii, South Dakota and New Mexico) include most services in their sales taxes. More states should be moving toward this. Because it’s very hard to sell to voters (think of the ads — an education tax!) it’d have to be accompanied by a drop in the sales tax rate, with the goal of raising exactly as much money through the new, broader tax as was raised through the old, narrow one. In geek-speak, it’d be revenue-neutral.
If this change were to take place, we’d be ready for:
Step 2: Replacing sales taxes with a value-added tax like those in England or India, which are basically just a cleverer way to calculate sales taxes. And then
Step 3: Having fixed the sales tax system, the real work could begin: using it to replace some or all of our expensive, loophole-prone income tax system. A “prebate,” like the one being pushed by Mike Huckabee and his “Fair Tax” friends, would make the system more progressive; basically it gives every family a check for $400 or so on the first day of each month, to make up for the higher tax rate. We could deal with the remaining regressivity by retaining a simple income tax system for the rich, which would be less susceptible to political tinkering because it would effect no more than, say, 15 percent of the population. (In fact, that’s how income taxes were first imagined in the United States.)
What would we get for all this? Well, we’d be putting my brilliant friend Corey, the tax lawyer, out of a job. In other words, we’d be freeing his colossal brain to do something more useful than income tax evasion.
But more fundamentally, we’d be following the first rule Corey must have learned in law school: if you dislike something, tax it. If you like it, don’t.
I don’t like consumption. I like production.
– posted by Mike