I know ‘good’ and ‘bad’ might not be the right words here, but I’m wondering if there’s any real agreement among economists about certain taxes.
What about things like:
I’d love to hear what people think about any of these.
There are a lot of things to unpack with taxes, but here are a few key points:
Some of the poorest households don’t earn income at all, often because of disabilities or caregiving roles. If you want to help them, you need direct benefits, not just tax policies.
Corporate taxes are ultimately paid by consumers, employees, or shareholders. A simpler system might be to tax dividends directly instead of corporate profits. That way, lower-income retirees could be taxed less than wealthy investors.
Capital gains are tricky. They reflect future income, which would already be taxed later if you have an income tax system. The exception here is housing, where prices have soared because of supply restrictions, not income growth.
Simpler tax systems are better overall. The fewer loopholes, the easier it is to avoid evasion and expensive admin costs. A classic example is whether a tomato is a fruit or vegetable—it shouldn’t matter for tax purposes.
A Value-Added Tax (VAT) is popular because it reduces tax evasion. Companies can get back what they paid on purchases, so they’re motivated to report transactions properly.
Universal Basic Income (UBI) is incredibly costly. Most of the money would go to middle- and upper-income earners, not just the poor. To fund it, you’d need massive tax hikes or deep cuts to other programs.
Comparing tax systems across countries is really difficult. A poor country might need tariffs instead of income taxes because they’re simpler to enforce.
Taxes on pollution can work, but only if they’re set up well. For example, taxing waste disposal could just lead to illegal dumping instead.
And yeah… pre-revolutionary France had an awful tax system. It’s the go-to example of what not to do.
@Fallon
Was France’s tax system really that bad, or do we just have more records about it? It seems like their bad tax policies are really well-documented because of the monarchy’s financial problems back then.
@Fallon
Wait, on point 2, why do you say employees or consumers pay corporate taxes? Aren’t there other costs businesses could push taxes onto, like suppliers?
Zorion said:
@Fallon
Wait, on point 2, why do you say employees or consumers pay corporate taxes? Aren’t there other costs businesses could push taxes onto, like suppliers?
That’s a fair point—it’s not only employees and consumers. Taxes could impact suppliers too, depending on their bargaining power.
Zorion said:
@Fallon
Wait, on point 2, why do you say employees or consumers pay corporate taxes? Aren’t there other costs businesses could push taxes onto, like suppliers?
It comes down to leverage. Big companies like Walmart already push suppliers to their limits on pricing, so taxes are more likely to hit wages, prices, or profits instead.
@Charlie
What stops businesses from just absorbing the tax by cutting into their own profits? Maybe they’d make it back by gaining market share.
Sal said:
@Charlie
What stops businesses from just absorbing the tax by cutting into their own profits? Maybe they’d make it back by gaining market share.
That depends on pricing and competition. If cutting prices would bring in enough new customers to make up for the tax, businesses would’ve probably done it already.
@Fallon
I didn’t quite get your point on UBI. Why would most of the money go to wealthier people instead of the poor?
Suki said:
@Fallon
I didn’t quite get your point on UBI. Why would most of the money go to wealthier people instead of the poor?
Because UBI is ‘universal.’ It goes to everyone, not just those in need. So a lot of payments end up going to people who don’t need financial help.
@Fallon
Exactly. If you gave $1,000 a month to every adult in the U.S., it would cost around $4 trillion a year. That’s nearly double the current federal budget.
West said:
@Fallon
Exactly. If you gave $1,000 a month to every adult in the U.S., it would cost around $4 trillion a year. That’s nearly double the current federal budget.
It’s not as simple as just adding $4 trillion. You’d save money by cutting existing welfare programs, and taxes could shift to balance it out. It’s more about redistributing what’s already in the system.
@Jessie
But you haven’t actually shown the math here. Cutting welfare programs wouldn’t come close to covering that cost.
@Jessie
Exactly. You can’t raise taxes and hand out $12k a year without it looking pointless. You’re just moving money around inefficiently.
If you’re curious about this topic, you might want to look into ‘optimal tax theory.’ It’s a field of economics that studies how to design tax systems efficiently.
Keegan said:
If you’re curious about this topic, you might want to look into ‘optimal tax theory.’ It’s a field of economics that studies how to design tax systems efficiently.
The basic idea is that the best taxes don’t change people’s behavior. Most taxes create ‘deadweight loss,’ meaning they disrupt economic activity and reduce overall wealth.
@Grayden
Some taxes are meant to change behavior though, like pollution taxes. They can help reduce harmful activities, even if they don’t raise a lot of money.
Winter said:
@Grayden
Some taxes are meant to change behavior though, like pollution taxes. They can help reduce harmful activities, even if they don’t raise a lot of money.
True. Taxes that target harmful behaviors can actually improve things overall. But they’re usually not reliable for long-term revenue since people start avoiding those activities.
@Grayden
How can taxes ‘destroy wealth’? Doesn’t the money just go back into the economy through government spending?
Drew said:
@Grayden
How can taxes ‘destroy wealth’? Doesn’t the money just go back into the economy through government spending?
It’s about the impact on choices. For example, if a tax makes steak more expensive, people might switch to chicken even if they prefer steak. That switch is a loss in value.