VAT is the most regressive tax since inflation. Rich people spend basically zero of their wealth. Poor people spend almost all of it. Even though there are exceptions and item-level exemptions, it's still the poor people who feel these prices the most, and it is reflected in spending behaviors in European countries in my experience.
VAT is regressive when you consider wealth yes, but as I wrote in the piece it's both counterbalanced by the UBI, and indeed there are mechanisms by which VAT is actually progressive. This OECD paper goes into more detail [1]. The short version is: VAT on its own and in practice is regressive but only because of savings. That's pedantic, I know, but it matters for the purposes of how the VAT-UBI loop scales. In particular, it allows you to fund a larger UBI more quickly than with any other funding method.
> even a roughly proportional VAT can still have significant equity implications for the poor – potentially pushing some households into poverty."
from your page:
> Elastic goods, i.e luxuries, shed demand as prices rise whilst inelastic goods like bread do not. This has the effect of refocusing the economy away from luxuries and toward inelastic necessities, which effectively makes VAT progressive, not regressive.
As someone who lives with a VAT rate of 20% on most goods (and 5% on other with 0% on most foods) it doesn't meaningfully direct away from luxury goods. Its just priced into things (and if your a build er o cash in hand, then you can make 20% extra)
Personally I would rather we look at "council houses" and making them much more universal. As that would be cheaper than UBI but have some of the same benefits.
It's priced in, yeah. As I said in the comment and in the post, VAT on its own is not nice. The paper also states:
> Nevertheless, any VAT increases, including VAT base broadening measures that impact the poor, should be accompanied by compensation measures for poorer households, such as targeted tax credits or benefit payments.
Which is essentially what I propose through UBI, I just have broader scope.
I see the point, but I don't see what is wrong with that, and I am relatively poor person. I see calls for equality all over the place, but nobody wants to be equal, especially not in taxation - a fix amount (not percent of something) sum per citizen is equal and nobody wants it. Equal rights, equal taxes, equal obligations, no exceptions - be it financial, demographic, military, etc.
I was about to comment something like this. Consumption from a VAT perspective doesn't increase linearly with wealth, so a more wealthy person isn't going to spend and get taxed via VAT 100x more than someone with 100x less wealth, and VAT affects the poor much more than the rich because it's a tax on consumption irrespective of wealth, so the poor pay a larger percentage of their wealth to VAT.
We should just get rid of VAT and replace the lost tax revenue with something that's more equitable, such as a proper wealth tax. It's not like wealth goes away with a UBI.
I was expecting they would adress the elephant in the room : the price of the room to fit the elephant (as, in "rents").
There are form of subsidies in France called "APL" (nothing to do with the programming language - the form you have to fill in order to request the subsidy is waaay more cryptict.)
The tacit agreement in the flat renting business, is that your rent will be "whatever you earn as subsidy from the government, plus however we can afford to ask." So it's still a free market where homeowners get to set the price - because they own a scarce asset that is in high demand, probably because they wisely chose their parents and year or birth.
It's just that the subsidy artificially increase the floor price.
I've always wondered how a government implementing UBI would prevent such an effect on the goods that are the most scarce, unliquid, and high demand / low supply.
Georgism? In the big 2026? Now that's a blast from the past!
Now, land value taxes obviously have their place in the gamut of different taxes to levy, so I don't wish to badmouth them too much. But as a consumption tax, VAT also does have its place. Sure, they are absolutely regressive, but this also helps them to act more like Pigovian taxes, since they can be used to make certain categories of goods and services more expensive. And so if one can afford to pay the value of the negative externalities, why not. And hopefully it can then steer people towards better choices.
> I’m aware of the irony of this statement. Everything is political.
This is a horrible cop-out. Sure, everything is political to an extent.
The subject of the article though, taxes, is political in nature. There is no way to discuss taxes outside of politics. Taxes are one of the most political subjects there can ever be, and trying to untangle them just means your argument will have exactly zero relation to reality.
This is true, but we also have monetary policy which for the longest time we have thought of as and tried to make apolitical. I would argue this is almost just monetary policy, and that's why I set this up as something that a central bank should do. It uses the word "Tax" but it really hardly is a tax.
I think the main problem is that this will not survive very long once implemented.
Politician A will promise "no VAT on bread" to get elected. The next guy will promise "no VAT on essentials". The next guy will promise "no UBI for the rich". And so on.
And you end up with the next politician dismantling the whole system as unfair.
If exemmptions need to be made, the tax isn't taxing the essence purely. With the 'no VAT on bread' example, we need to work out why. How can we quantify why bread shouldn't be taxed?
I'm guessing eventually we'll work out that 'fresh food' shouldn't be taxed, and the processed food should be. It's here we can work out that certain chemicals, processes, facilities, etc, are actually what should be taxed at source, and through doing so, we can save the world billions in accountancy bills.
Sort of but that's actually ideal, I don't think it will be completely scrapped if implemented, some parts will remain. Those being the ones that make the most sense to the most people.
Nice to see others thinking along the same lines as I am[0]. I can use this to expand my thoughts on the issue as well, maybe finally get around to that blog I've been thinking of for years.
The article argues that consumption taxes are necessary for this model, but there's no mention of why VAT is the best tool for the job. I'm not sure why VAT is sacrosanct.
I've read that it costs small companies around 2% of turnover to be VAT compliant. In the modern age, this is absolutely insane.
We have the ability to work out how much businesses spend to do a job. We can boil that into a transaction or sales tax, which - with digital payments - can practically be automated at source. (if people pay in cash, that assumes a local service being supported, so who cares if its taxless? it balances out the unethical practices associated with hugebusinesses).
There's also no mention of externality taxation. If we're going to have socialised services, surely consumption taxes need to be raised in parallel to how much goods/services impact society?
Everyone keeps saying VAT is regressive, that seems to miss the point that the author explicitly pairs it with UBI.
It's also dubious that a VAT is intrinsically regressive, a VAT is essentially a tax on business revenue. Most items for which the price is set by demand will face downward pricing pressure a force that ultimately results in the VAT contracting profitability and not being regressive.
The issue with the argument that consumption based taxes like a VAT or tariffs are regressive is that it assumes an altruistic pricing mode. A state which is very far from reality. If our multinational corporate conglomerate market dominators could raise prices to absorb all taxes then their current pricing is too low. A case I don't think many would make in the current age of consistent record breaking profits.
The thing to remember is the corporate goal is that prices are set to be the maximum the market will bear.
Since it looks like you’re the author, well… “you’re (that’s) socialist.”
Given you’ve (ironically or not) opened with a threat to murder anyone who makes this claim, via “I’m tired of being calm about this. If you so much as whisper ‘that’s socialist’ […] I will beat you to death with a sickle tied to a demand curve.”:
You may try to beat people to death with your precious sickle. In the civilized world, you’ll die from a stream of (ideally lead-free, but when people are try to kill you being environmentally friendly is optional) high speed projectiles.
You propose redistribution intentionally and explicitly, then claim, “redistribution isn’t the point”. Yes. It is, and we all know it.
You lie that it won’t cause massive inflation to just print money and then tax it, before going on to admit, “Whoever calculates the national CPI will have a tiny bit of extra work to do. It also is inflation in terms of eroding savings and assets.” …so yes, it will be inflation, but you just need someone to do the lying for you via a bit of “extra work”.
You claim this will solve the stagnation of Western economies, the “far right”, nationalism, housing, and “consumption as a component of economic activity”. Will it also solve world peace and hunger, or do you want to stop while you’re behind?
Just admit what you want directly AND stop lying in the process.
I know my tone was harsh, but that's mainly because I'm tired of people thinking I'm taking a side. Using VAT to fund this means that it isn't a tax on capital or on labor, that's why it's more neutral than all other methods. A wealth, profit, dividend tax, that's a tax on wealth or capital or rich people or business, whatever you prefer. An income tax is a tax on workers. VAT avoids that question.
It is slightly redistributive, yes, but really only slightly. Its hard to design it to not be redistributive, but if you really want to do that then you raise VAT and lower income taxes instead of funding a UBI. I wrote about that later in the piece.
This is essentially "The Fair Tax" proposed many years ago, it's a VAT, but with a pre-bate check that covers the VAT up to a certain percent of income. So if there's a $100K no VAT minimum. The pre-bate is $25k. Anyone spending less than $100k annually pays zero taxes. Pair that with VAT exemptions for second hand goods and business under a certain size and you solve most wealth inequality and welfare issues very quickly.
I think UBI is necessary but it’s about where you get it. Just making up and printing money for it is like when I was a kid and thought that you could just write checks and create money. We need to move money from the ultra wealthy and corporations to UBI. It’s actually astounding Americans repeatedly vote for the exact opposite to happen. Maybe the midterms can be a turning point.
I also think UBI is necessary, but I don't have a political agenda on how to force people funding it. Maybe it's me growing in a communist country and hating it to death (communism, socialism and all the variants that treat people like cattle "for the greater good").
VAT is one of the most regressive taxes imaginable, the author doesn't know what the hell he's writing. Or maybe it's AI-generate slop, too lazy to check.
Can we just tax billionaires who take out infinite loans against a market they get to rig because they take out infinite loans against a market they get to rig because they take out infninite loans against a market they get to rig because they takeout infinite loans agianst a market they get to rig because thye takouet inifnite loans?
[1] https://www.oecd.org/en/publications/reassessing-the-regress...
> even a roughly proportional VAT can still have significant equity implications for the poor – potentially pushing some households into poverty."
from your page:
> Elastic goods, i.e luxuries, shed demand as prices rise whilst inelastic goods like bread do not. This has the effect of refocusing the economy away from luxuries and toward inelastic necessities, which effectively makes VAT progressive, not regressive.
As someone who lives with a VAT rate of 20% on most goods (and 5% on other with 0% on most foods) it doesn't meaningfully direct away from luxury goods. Its just priced into things (and if your a build er o cash in hand, then you can make 20% extra)
Personally I would rather we look at "council houses" and making them much more universal. As that would be cheaper than UBI but have some of the same benefits.
> Nevertheless, any VAT increases, including VAT base broadening measures that impact the poor, should be accompanied by compensation measures for poorer households, such as targeted tax credits or benefit payments.
Which is essentially what I propose through UBI, I just have broader scope.
We should just get rid of VAT and replace the lost tax revenue with something that's more equitable, such as a proper wealth tax. It's not like wealth goes away with a UBI.
I was expecting they would adress the elephant in the room : the price of the room to fit the elephant (as, in "rents").
There are form of subsidies in France called "APL" (nothing to do with the programming language - the form you have to fill in order to request the subsidy is waaay more cryptict.)
The tacit agreement in the flat renting business, is that your rent will be "whatever you earn as subsidy from the government, plus however we can afford to ask." So it's still a free market where homeowners get to set the price - because they own a scarce asset that is in high demand, probably because they wisely chose their parents and year or birth.
It's just that the subsidy artificially increase the floor price.
I've always wondered how a government implementing UBI would prevent such an effect on the goods that are the most scarce, unliquid, and high demand / low supply.
Put a tax on the value of land instead of the property improvements. Then you'll start to see some wealth flow away from the UHNWIs.
Now, land value taxes obviously have their place in the gamut of different taxes to levy, so I don't wish to badmouth them too much. But as a consumption tax, VAT also does have its place. Sure, they are absolutely regressive, but this also helps them to act more like Pigovian taxes, since they can be used to make certain categories of goods and services more expensive. And so if one can afford to pay the value of the negative externalities, why not. And hopefully it can then steer people towards better choices.
Luxury tax and tax on secondary homes would probably be better.
https://landeconomics.org/reports/spokane-report
I think what you're missing is that land in the wealthiest parts of town is worth exponentially more than land out in the suburbs
> I’m aware of the irony of this statement. Everything is political.
This is a horrible cop-out. Sure, everything is political to an extent.
The subject of the article though, taxes, is political in nature. There is no way to discuss taxes outside of politics. Taxes are one of the most political subjects there can ever be, and trying to untangle them just means your argument will have exactly zero relation to reality.
Politician A will promise "no VAT on bread" to get elected. The next guy will promise "no VAT on essentials". The next guy will promise "no UBI for the rich". And so on.
And you end up with the next politician dismantling the whole system as unfair.
I'm guessing eventually we'll work out that 'fresh food' shouldn't be taxed, and the processed food should be. It's here we can work out that certain chemicals, processes, facilities, etc, are actually what should be taxed at source, and through doing so, we can save the world billions in accountancy bills.
[0] https://news.ycombinator.com/item?id=48428776
I've read that it costs small companies around 2% of turnover to be VAT compliant. In the modern age, this is absolutely insane.
We have the ability to work out how much businesses spend to do a job. We can boil that into a transaction or sales tax, which - with digital payments - can practically be automated at source. (if people pay in cash, that assumes a local service being supported, so who cares if its taxless? it balances out the unethical practices associated with hugebusinesses).
There's also no mention of externality taxation. If we're going to have socialised services, surely consumption taxes need to be raised in parallel to how much goods/services impact society?
It's also dubious that a VAT is intrinsically regressive, a VAT is essentially a tax on business revenue. Most items for which the price is set by demand will face downward pricing pressure a force that ultimately results in the VAT contracting profitability and not being regressive.
The issue with the argument that consumption based taxes like a VAT or tariffs are regressive is that it assumes an altruistic pricing mode. A state which is very far from reality. If our multinational corporate conglomerate market dominators could raise prices to absorb all taxes then their current pricing is too low. A case I don't think many would make in the current age of consistent record breaking profits.
The thing to remember is the corporate goal is that prices are set to be the maximum the market will bear.
> This is not a political post
Why is this rage bait on the front page of HN?
What a nightmarish mind and prison for the soul. What a waste of our precious time on Earth.
Given you’ve (ironically or not) opened with a threat to murder anyone who makes this claim, via “I’m tired of being calm about this. If you so much as whisper ‘that’s socialist’ […] I will beat you to death with a sickle tied to a demand curve.”:
You may try to beat people to death with your precious sickle. In the civilized world, you’ll die from a stream of (ideally lead-free, but when people are try to kill you being environmentally friendly is optional) high speed projectiles.
You propose redistribution intentionally and explicitly, then claim, “redistribution isn’t the point”. Yes. It is, and we all know it.
You lie that it won’t cause massive inflation to just print money and then tax it, before going on to admit, “Whoever calculates the national CPI will have a tiny bit of extra work to do. It also is inflation in terms of eroding savings and assets.” …so yes, it will be inflation, but you just need someone to do the lying for you via a bit of “extra work”.
You claim this will solve the stagnation of Western economies, the “far right”, nationalism, housing, and “consumption as a component of economic activity”. Will it also solve world peace and hunger, or do you want to stop while you’re behind?
Just admit what you want directly AND stop lying in the process.
It is slightly redistributive, yes, but really only slightly. Its hard to design it to not be redistributive, but if you really want to do that then you raise VAT and lower income taxes instead of funding a UBI. I wrote about that later in the piece.
https://en.wikipedia.org/wiki/Wealth_inequality_in_the_Unite...
It's bizarre to think people who can change the tax brackets via dark money are "paying the most".
Sure man, if I pay zero because I'm homeless and you pay a dollar; wow! you're paying the most taxes. Congrats on your logical fallacy.