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This is similar to getting rid of income tax and replacing it with higher sales taxes. Tariffs will only affect the portion of your income that goes to purchases.
Guess which people spend the majority of their income, percentage-wise, on purchases? That’s right! Not billionaires.
This is not surprising at all.
Income tax is paid by the working class. Billionaires don't have "earned income" (because they don't have jobs) so they don't pay income tax. They make money through investments.
If Elon musk sells a billion in stock because he needs cash to buy a company, say like Twitter, isn't that income tax? When an investment is realized, isn't that also income? I know that a lot of the rich use assets as collateral to borrow instead of 'realizing' it, but to say the rich aren't affected by income tax isn't entirely true.
No, when someone like Musk sells their investments it's not taxed as regular income, it's taxed as "capital gains." The capital gains tax rate is lower than the income tax rate, and can be as low as 0%. Also, only the net profit (if there is any) is taxed. Unlike income, where it's all taxed and the lowest rate is 10%.
Someone like Musk can sell a billion USD of stock and not have to pay any tax on it by selling a mix of shares that lost money and made money.
If you sell stock that lost and made money in balance like that, then you're just liquidating your own money. There hasn't been any profit, so there's nothing that should be taxed.
True. But it's also part of a greater strategy to avoid paying taxes.
https://www.investopedia.com/terms/t/taxgainlossharvesting.asp
I'm guessing this will pass bipartisan, since both dems and republicans could do more central planning around what people consume then. Dems would want to use it to increase sustainability in consumption and both parties will want to push more American manufacturing (or at least non-Chinese).
Also one great side effect might be that people will rely more on local black markets for necessities, this increasing community cohesion and sustainability.
Generally tarrifs over income taxes makes sense in some ways, I don't expect him to understand what he saying or implement changes the right way, and there are geopolitical challenges.
If you think of taxes as friction or a decinsentive...
We should move away from income taxes. Consider a progressive income tax system, where the first 15k is not taxed, and the next 15k is taxed at a rate of 10%. Start here. Why are we taxing income at these levels?
Sales tax on goods makes sense. As it covers externalities.
Sales tax on services doesn't make sense. Why are we taxing exchanges of labour? This impacts productivity.
Trade is good when it's taking advantage of geographic advantages in a healthy way: I will trade you maple syrup for lemons. But not when a developed country is just exporting their exploitation: I have health, labour, environmental rules and you don't let's trade... A tarrif to equalize here makes sense.
Lastly developed economies should tax corporations on revenue (not income), this makes sense once they get to a certain size or share of the market. At the point where they are no longer adding value and instead just using size to hold market position through uncompetitive practices.
We should move away from income taxes. Consider a progressive income tax system, where the first 15k is not taxed, and the next 15k is taxed at a rate of 10%. Start here. Why are we taxing income at these levels?
That is already exactly what we do today. Your personal standard deduction means that the first $10k you earn is not taxed. Everything over that starts in the lowest tax bracket and is only taxed at that level, filling each progressively higher bracket as you go up. Additional dependents increase the starting point of when you get taxed.
When you do your taxes they give you charts to handle this calculation which gives you your "effective tax rate", but those charts are based on this progressive system.
Trade is good when it's taking advantage of geographic advantages in a healthy way: I will trade you maple syrup for lemons. But not when a developed country is just exporting their exploitation: I have health, labour, environmental rules and you don't let's trade... A tarrif to equalize here makes sense.
Very true but it isn't entirely about labor/environmental rules. I think capitalism likes to tell us to blame their failings entirely on those things.
In reality they have a few advantages that our capitalists don't want you thinking about. When you have a billion people in your country you are working with scales that are considerably different. Also countries like China seem to be fine with giant vertically integrated monopolies (probably because they know they have the power to keep their corporations in line) which lets them reduce the middlemen taking their cuts along the way. And of course their giant government subsidies.
And if we have industries that are so important and add enough overhead in cost to our other industries (such that they can't be competitive with overseas monopolies), maybe the government should take those over so they aren't running to make profit instead of adding tariffs that just tax the people. That could put all the other businesses in the country dependent on those base things (power/steel/batteries/etc) on at least a little more level ground.
Tariffs may still be required but let's not blame the entire situation on missing labor/environmental laws when uncontrolled capitalism is taking a big bite out of our end.
Lastly developed economies should tax corporations on revenue (not income), this makes sense once they get to a certain size or share of the market. At the point where they are no longer adding value and instead just using size to hold market position through uncompetitive practices.
I would say it is difficult to make laws that can effectively do this especially since different sectors have different sizes/expected revenues. It would be better if Congress would just do their job to just break up those companies when they get to that point. Or if their portion of the market no longer can foster healthy competition maybe it is time to treat them like a utility.
On progressive taxes: my apologies, i wasn't very clear. Yes I'm familiar with how it works, I just meant raise the bottom tax bracket. EG: first 30k is not taxed.
On economic systems: there are negative trade offs with scale, central planning, vertical integration. Less diverse ideas, can be slower. There are still middlemen just structured differently.
I'm not against publicly owned companies though, they should tend towards infrastructure and natural monopolies (rail, telecom, probably some tech...)
I disagree that it would be easier/more efficient to break up companies than to tax them as they approach that state of need. But I'm not against the idea.
Sales tax on goods makes sense.
No. Sales and use taxes are inherently regressive; they affect the poor far, far more than they affect the wealthy, and thus harm all of society.
Tariffs don't make any sense, because that cost simply gets passed on to the consumer. The company I work for uses a lot of aluminum; the raw material is imported from China, and is custom extruded to our spec here in the US. Aluminum from the US is prohibitively expensive. If tariffs double the price of the aluminum, then the company we buy it from is going to pass that price on to us, and we're going to turn around and pass it on to our consumers. There's simply no competing industry in the US, and building the industry to compete would take a decade or more. So it's not even creating an incentive to buy American, because you can't.
A sales tax as a general term on goods that have negative externalities. That produce pollution, have negative health impacts, use public infrastructure etc.. whole foods, homes at minimum should be exempt. I agree that the poor shouldn't bear the brunt of tax policy changes.
Yes tarrifs getting passed to the consumer is completely the point, to normalize for asymmetrical human rights across the globe. Fair trade, not free trade. Not isolationist either. An elegant way to implement would be based on a democracy index.
The aluminum example is a good one. The consumer in this case is the company importing aluminum. They can buy from an authoritarian country at a 2x tarrif (or whatever), or a democratic country with no tarrif.
But... more of a thought experiment, I think that would be the way from a humanist perspective. But the geopolitics are very challenging.