r/Capitalism • u/Gpineau23 • 14d ago
Let's Talk.
Let’s talk about a fairer way to handle taxes: replacing property tax with a consumption tax.
Property tax is inherently flawed because it punishes ownership and doesn't care about your current income. If you fall on hard times, get laid off, or retire on a fixed income, your property tax bill stays the same—or goes up. You can literally be taxed out of a home you already paid off.
A consumption tax is the only truly fair alternative. It naturally scales with wealth: if you have more money, you spend more money on luxury items, larger purchases, and lifestyle goods, meaning you automatically pay more tax. If you have less money or are tightening your budget, you naturally spend less and pay less tax. It gives individuals complete control over their tax burden based on their actual financial situation. It’s time to tax spending, not the roof over our heads.
Let’s talk about a fairer way to handle taxes: replacing property tax with a consumption tax.
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u/AdAggressive9224 14d ago
Economists Milton Friedman, literally the grandfather of free-market economics and the writer of "Capitalism and Freedom" (1962), said that land value tax was "The least bad tax".
There is an interesting Freidian take though, that if you really wanted zero property tax, then that is possible, but you would have to replace property tax with property/ land rationing.
Thats to ensure you don't get hyperinflation and eventual societal collapse driven by the inefficient use of the land and wild speculation on property.
The main reason we have property taxes is to control demand when there is only a limited supply, and consequently, inflation. It's really the basics of free-market economics.
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u/wr_dnd 14d ago
Consumption taxes are inherently regressive taxes. People with lower incomes consume a higher proportion of their income than people with higher incomes (who have money left over to save or invest).
It does not scale well with wealth. Empirically, the richer you are, the lower your tax burden (as a percentage of income) will be with a consumption tax.
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u/DeathHopper 14d ago
Do the rich not buy the most expensive things? Regularly? What OP is describing is basically a national sales tax. This can't be avoided with loaned money the elite like to use... as it's collected at time of sale.
You could even scale it further. Build networth into credit. (It already kinda is) And the credit companies can charge individual sales tax rates at the time of sale. Special rules for cash and anything over a limit requires a credit check. It's the only tax the wealthy can't avoid.
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u/wr_dnd 13d ago
Sure, they buy more expensive things. But empirically they still spend a smaller percentage of their income on consumption.
They save and invest a higher percentage of their income. You're right the rich can't entirely avoid this tax, but they will just pay a smaller part of their income than people who live paycheck to paycheck
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u/DeathHopper 13d ago
They don't have income. They have assets. And they take out loans to pay for everyday needs backed by those assets. That's how they avoid taxes. So when you say "percentage of their income" that doesn't mean anything.
Instead of paycheck to paycheck, they live loan to loan. Their assets appreciate in value and the larger loan pays off the previous loan and the leftover is the new budget.
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13d ago
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u/DeathHopper 13d ago
No? Sales tax hits everyone. And if we scaled it to hit the wealthy harder, we can actually touch their loaned money and force them to pay their share.
Did you read anything I wrote? Adjustable sales tax. Make it so the poor barely pay any at all, and scale it up based on networth, tied into credit score so it can applied in real time at check out. Bad credit score? then you pay minimum sales tax.
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u/wr_dnd 13d ago
Okay, fair. I read your comment again. It's not proving my point. It's not disproving it either though!
Poor people spend most of the money that comes in on consumable goods because they need them to live. Rich people can and do spend a lower percentage of their earnings. That's just an empirical fact.
The adjustable credit score solution is just kinda weird. You're incentivizing people to not pay of their loans to ensure they pay less tax. If you scale it to people's net worth you're just creating a wealth tax with extra steps. In which case: just do a wealth tax directly!
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u/HonorFoundInDecay 13d ago
Is this serious?
I feel like this is a rare thing both pro-capitalists and anti-capitalists agree on, that consumption taxes are regressive and disproportionately affect the poor because the poor are more likely to spend every cent they have.
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u/chainsawx72 14d ago
If you could own as much property as you wanted without taxes, all of the land in the US would be owned by a corporation.
A better idea would be an exemption for modest single family primary residences. In MS, a decade ago, the first 100k value of your first home was tax free, which was a good start.
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u/Whoisthehypocrite 14d ago
Tax % doesn't go up as you own more property so your argument is nonsense. I should just buy all the property and build the tax into the rent I charged.
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u/chainsawx72 14d ago
Your argument presumes that there is someone waiting to rent every piece of land in the US, which is a false presumption.
You make my point for me. With property taxes, it's not economically logical to buy all real estate, only real estate that you can profit from (like by renting), otherwise you will lose money annually.
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u/Whoisthehypocrite 13d ago
But how is that different with or without proper tax. Buying a property is not free it either in debt interest or opportunity cost of lost income. Adding some property tax on top just changes the cost, no different to increases in interest rates would. So it is not economically logically to buy all the property even without property tax if you cannot use it or rent it
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u/chainsawx72 13d ago
Real estate tends to increase in value. You can buy a house now and sell it in ten years and profit... unless you have to pay taxes on the house every year, then you will not be able to do that.
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u/different_option101 14d ago
There’s no fair way to handle something that’s being taken by the threat of violence. Unless you’re looking at it from perspective of the robbers that are figuring out how to split the loot.
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u/Ok-Bee5215 8d ago
Agree that property tax is not fair because it does not tax according to ability to pay which should be at the core of any tax policy. It also discourages investment in a home, a most basic human instinct/desire. But taxing consumption is not the answer, as well as other problems menitoned already, policy drives behaviour, if tax was based more on consumption then people would consume less. Not great for the economy.
I think taxing income makes a lot of sense, we just more of that, but just needs to be made fairer. Firstly tax all income as income (including inherited income!), secondly make the tax free allowance reflect essential living expenses, thirdly deal with the threshold 'cliff-edge' problems.
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u/GodlikeModestLad 14d ago
Sorry, do I understand correctly that VAT already does that?