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So want to ignore that 25% are flat taxes, no idea on percent of economy but some that are flat are very large economies. And you are agreeing that VAT is very regressive. I thought the question was about ones that are not progressive - most countries are progressive like the US, that is the norm but even many in Europe are barely progressive with most paying a very high rate at even middle income rates.
In what world is $10M hitting quickly and almost flat - the great majority of corporations are not that big and even many large corporations get big write-offs due to overseas taxes, tax credits and amortization of costs.
A VAT isn’t regressive. Not even a little bit.
It’s a horrible tax, but regressivity isn’t one of its failings.
A 10% flat tax would be a massive tax increase for the half of tax payers who don’t pay any federal income tax and a tax decrease for well off Americans who “don’t pay their fair share”.
In other words, a flat tax is a waste of air and a total non starter that’s thrown out each individual tax season when clueless, uninformed people come out of the woodwork for a week or so.
10% of $10K = $1K
10% of $100K = $10K
Why should one taxpayer pay more for the same government service???
It’s a horrible tax, but regressivity isn’t one of its failings.
Sorry - it is a regressive tax - maybe not as much as some but many studies have evaluated it as a regressive tax - from tax foundation
Quote:
when the VAT burden is measured as a percentage of current income, studies found that VAT is regressive, meaning that people with lower income pay a higher share of their income in VAT than higher income individuals. European country studies that adopt this approach (Leahy et al., 2011; Ruiz and Trannoy, 2008; O’Donoghue et al., 2004) conclude VAT is a highly regressive tax.
There is nothing immoral or undesirable about a regressive tax. Actually, a regressive tax has some very good properties - it provides incentives to earn more and thereby add more economic value to society.
Sorry - it is a regressive tax - maybe not as much as some but many studies have evaluated it as a regressive tax - from tax foundation
from the same link
In contrast, studies that present VAT burdens as a proportion of current expenditure across either the income or expenditure distribution (Bird and Smart, 2016; IFS, 2011; Metcalf, 1994) generally find that VAT systems are relatively proportional, or even slightly progressive. By measuring VAT burden relative to expenditures, instead of current income, the influence of savings is removed, allowing for a clear picture of the distributional impact of VAT.
So it really depends on your definition of "regressive". A pure definition would be the rate goes down as the amount of the item being taxed goes up. For a VAT to be regressive, there would need to be a lower rate on higher amounts of expenditures. Income is irrelevant.
There is nothing immoral or undesirable about a regressive tax. Actually, a regressive tax has some very good properties - it provides incentives to earn more and thereby add more economic value to society.
This.
FICA IS actually regressive (flat until $150k, 0% marginal afterwards) and the same people who are screaming about "regressive taxes" would scream bloody murder at the very thought of abolishing social security and replacing it with a private contribution scheme.
Sorry - it is a regressive tax - maybe not as much as some but many studies have evaluated it as a regressive tax - from tax foundation
Nope. As I said before, not even a little bit.
Progressivity or regressivity of a tax is a function of how the tax rate changes when the base to which the tax is applied changes. Easiest for most to understand is the US income tax system. As income increases, the income tax rate increases as well. This is a progressive tax. If the tax rate increased when income decreased, it would be a regressive tax. We can clearly see that regressive taxes are the opposite of progressive taxes.
In the case of a VAT, or any sales tax, progressivity or regressivity is, as with an income tax, a function of how the tax rate changes when the base to which the tax is applied changes. And here is where so many get it wrong - the base to which a VAT is applied is consumption, not income. Indeed, income has NOTHING to do with a VAT, or any other sales tax. For a VAT to be regressive, the rate would have to increase as consumption, the base to which the tax is applied, decreases. This clearly doesn’t happen, and as such, a VAT is not in any way regressive.
It has become fashionable by those that have little understanding of the subject to claim that a tax is regressive if it creates an increased negative burden on the poor. This creates a problem. Words have meaning, and this requires one to completely change the meaning of the word regressive. It’s the opposite of progressive - there is no need to make up a new definition out of whole cloth, and it is entirely inappropriate to do so.
FICA IS actually regressive (flat until $150k, 0% marginal afterwards) and the same people who are screaming about "regressive taxes" would scream bloody murder at the very thought of abolishing social security and replacing it with a private contribution scheme.
No it’s not, for the same reasons explained above.
Progressivity or regressivity of a tax is a function of how the tax rate changes when the base to which the tax is applied changes. Easiest for most to understand is the US income tax system. As income increases, the income tax rate increases as well. This is a progressive tax. If the tax rate increased when income decreased, it would be a regressive tax. We can clearly see that regressive taxes are the opposite of progressive taxes.
In the case of a VAT, or any sales tax, progressivity or regressivity is, as with an income tax, a function of how the tax rate changes when the base to which the tax is applied changes. And here is where so many get it wrong - the base to which a VAT is applied is consumption, not income. Indeed, income has NOTHING to do with a VAT, or any other sales tax. For a VAT to be regressive, the rate would have to increase as consumption, the base to which the tax is applied, decreases. This clearly doesn’t happen, and as such, a VAT is not in any way regressive.
It has become fashionable by those that have little understanding of the subject to claim that a tax is regressive if it creates an increased negative burden on the poor. This creates a problem. Words have meaning, and this requires one to completely change the meaning of the word regressive. It’s the opposite of progressive - there is no need to make up a new definition out of whole cloth, and it is entirely inappropriate to do so.
Sorry, your explanation is incorrect - regressive is not about tax rate but about impact of the tax on income. If you taxed everyone $100,000, it would consume all income from most but barely impact someone with millions - so very regressive even at a fixed rate. Lower income people often spend a bigger portion of income on stuff that is subject to tax so a bigger proportion of their income is taxes - so regressive but fair tax on consumption. Often sales tax is not applied to food and sometimes to other things such as clothes to reduce or eliminate the regressive nature of these taxes.
A regressive tax is a tax applied uniformly, taking a larger percentage of income from low-income earners than from high-income earners. It is in opposition to a progressive tax, which takes a larger percentage from high-income earners.
Because lower-income households spend a greater share of their income than higher-income households do, the burden of a retail sales tax (or VAT) is regressive when measured as a share of current income: the tax burden as a share of income is highest for low-income households and falls sharply as household income rises.
A regressive tax may at first appear to be a fair way of taxing citizens because everyone, regardless of income level, pays the same dollar amount. By taking a closer look, it is easy to see that such a tax causes lower-income people to pay a larger share of their income than wealthier people pay. Though true regressive taxes are not used as income taxes, they are used as taxes on tobacco, alcohol, gasoline, jewelry, perfume, and travel.
The experts disagree with you - read what I linked before - it cites studies about it. The VAT is a terrible tax anyway since it hides the actual impact / cost.
Don't get me wrong - I would like more use of these type of taxes. But it is somewhat regressive in nature. In many ways the concept is ok in that impacts all consumption equally but it is the wrong method to use since it hides it's impact. A national sales tax replacing most or all income taxes would be fine with me even if some was refunded back to the very poor - it would ensure everyone has skin in the game, sees the impact of taxes.
When measured against income - snipped from your quotes specifically for sales tax. Sales tax and its rates are not set by income, it’s set by value of the transaction and the rate is typically flat, so neither regressive or progressive.
I think TaxPhd and I got into it before discussing something similar(fica I believe)but ultimately I believe he was right. If the tax is flat and applied in a uniform fashion it’s not regressive, when you measure it against something totally unrelated to how it’s calculated/applied you may call it regressive but that’s because you are comparing it to something unrelated.
Regressive in nature, practical applications etc are imo different than something actually being a regressive tax
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