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Actually, no he didn’t

Henry Gomersall says:
July 30 2022 at 8:22 am
I’ve been advocating for a while for a steeply progressive consumption tax to replace income taxes. Essentially you are taxed on what you spend each year, but scaled heavily at the top end (at the bottom end, it would look much the same as now). It would have two effects – 1. Directly addresses the primary problem of wealth inequality, which is spend inequality and 2. Ties tax paid to consumption in the real economy rather than indirectly. It would probably require a wealth tax or more progressive inheritance tax to help prevent dynasties.

Richard Murphy says:
July 30 2022 at 4:01 pm
I advocated this in The Joy of Tax

The progressive consumption tax leaves wealth, income from wealth, entirely tax free. And only taxes that portion of income – from whatever source – is spent upon consumption. The idea that Spud would recommend this is absurd of course.

20 thoughts on “Actually, no he didn’t”

  1. The Meissen Bison

    With a steeply progressive consumption tax does HMRC monitor your spending and apply the appropriate level of “consumption tax” at point of sale? Could one avoid paying it by living near Folkestone and doing one’s shopping in Coquelles?

  2. I’ve been advocating for a while for a steeply progressive consumption tax to replace income taxes

    How on earth could HMRC administer that? Capturing income is one thing but spend is so much harder as you have to net out all of the transfers from one account to another that aren’t direct spend. What about a firm paying staff, isn’t that a spend? What about a house purchase? Buying a house is a huge capital outlay so should attract a high progressive rate of tax. Does a matching house sale offset this so some property transactions exempt?

    The complexity is enormous so the routes for tax avoidance and evasion would inevitably be enormous too.

  3. No, it’s actually very simple. Capture income as we do now. All investments live in a giant SIPP (or IRA, 401k, that sorta thing). There, we’re done. Income tax is paid upon income minus additions to the SIPP, or income plus extractions from the SIPP, at progressive rates.

  4. A tax on money spent… that will result in a larger barter economy, won’t it?

    And then, in response to that, an army of state-owned statisticians will be raised to analyse all expenditure, to identify those who seemingly underspend and who may therefore be filthy black marketeers – and tax them anyway. You will pay the tax for what you SHOULD have spent, comrade.

    Plus the inevitable need for enforcement officers…for our own good of course.

    If this ever comes off I think I’ll invest in jackboot manufacturers.

  5. Bloke in North Dorset

    And guess who’s going to decide what is good consumption that gets a tax break and what is bad consumption and should be punished with higher taxes.

  6. Actually this appeals to me but wouldn’t VAT be the way to do it? Or Sales Tax like wot we used to have (I can’t even remember its name).

    Fixing the bands is easy. 0% on essentials – food, water, household fuel, children’s clothes & shoes, bicycles (my one concession to Greenery)…

    A good bit more on needlessly expensive cars – start the band at about the level of BMW and Mercedes. And on flights, railway journeys, and ferries that leave the UK (except to British possessions: Man, CI, Gib, Bermuda, …).

    Ditto boozes: start their higher band at about the level of champagne, good claret, decent burgundy. Spirits made from grapes rather than grain … No extra tax on beer or cider/cyder.

    Also luxury clothes, handbags, shoes, perfumes, etc. You’ll see that this scheme achieves several ends without violating WTO agreements.

  7. dearieme

    You missed model railway trains and bits from your 0% rate of VAT. They can’t be fripperies or luxuries if the ascetic Potato is a model train hobbyist.

  8. One of the theories behind taxing essentials is that everyone needs ’em so taxing incentivises ways to avoid ’em or use less of them. And your definition of essential (that first 100 litres of water a day may be, but all of it, really?)
    Give people money who don’t have it the money to buy the essentials instead.

  9. But but but…
    The greatest threats to humanity are imminent climate armageddon and starving people in Africa because Ukraine can’t export its grain.
    Therefore energy and food must be the most highly taxed consumption items.

  10. @TMB
    One can take that much further. Do what I did. Build up a store of wealth. Fuck off to another country to spend it. Tax only on consumption would have suited me fine. Could have fucked off 10 years earlier. And no, you’re not going to be able to tax me on my money exiting. I’m far too clever for that. One thing a consumption tax would achieve is the biggest black economy ever. Hooray for Cardigan Man! I’d be recommending him for sainthood at minimum.

  11. We all know the potato wants to tax income , your consumption and your wealth (including your main residence) to suggest otherwise is not to know how Spud thinks.

  12. Point – I’ve been advocating for a while for a steeply progressive consumption tax to replace income taxes

    Point not got – No, it’s actually very simple. . . Income tax is paid upon . . .

    It may well be that the point was worthless, but it isn’t addressed by not addressing it.

  13. A good bit more on needlessly expensive cars – start the band at about the level of BMW and Mercedes.

    I suggest starting the band some way below the car you want; we might avoid the bands altogether.

  14. Wouldn’t a ‘progressive’ consumption tax just mean that no-one bought anything but leased everything instead? Buying a car for (say) £25k in one go is going to cost a fortune in tax, whereas leasing it in relatively small monthly amounts will be far cheaper. Ditto everything. TVs, holidays, a new conservatory etc etc.

  15. Dennis, Twatty Something or Other

    So now we know Murphy doesn’t understand the difference between a consumption tax and an income tax.

    Show of hands of those who are surprised.

  16. The Meissen Bison

    BiS – Spud’s Law dictates that people DO NOT move in order to avoid tax. You probably went for the sunshine and the tappas.

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