From: pelton@ecf.toronto.edu (PELTON MATTHEW ALAN)
Subject: Re: Liberal Party Tax Policy
Organization: University of Toronto, Engineering Computing Facility
Date: Tue, 26 Jan 1993 19:24:16 GMT

In article <C1G5Ax.13t@mach1.wlu.ca> dmccrea6@mach1.wlu.ca (doug mccready F) writes:
>In article <C1F6qD.DBI@ecf.toronto.edu> pelton@ecf.toronto.edu (PELTON MATTHEW ALAN) writes:
>>In article <C1Eoz0.H7I@mach1.wlu.ca> dmccrea6@mach1.wlu.ca (doug mccready F) writes:
>>
>>  The reason a sales tax or a GST is said no not be based on ability to pay
>>is that it is a regressive rather than a progressive tax.  People with higher
>>incomes pay a larger percentage of their income for income tax;  this progress-
>>ive system is essential to a mildly socialist state like Canada.  A GST,
>>however, forces everybody, regardless of income, to pay the same amount every
>>time they buy something.  For poorer people, this translates to a higher 
>>percentage of their income;  at the very least, disregarding the fact that 
>>richer people invest far more than poorer people, it is a flat-rate tax.  A
>>graduated income tax fulfills the principles of equalization much better than
>>a sales tax.
>>
>The proper definition of a regressive tax is one for which the rate
>increases as the base declines. Thus, if you spent 1.00, your tax would be
>.07 but if you spent 10.00, your tax would be .60 would be a regressive tax.
>Check out the public finance books, including my text. If you are using
>income as a base (which is clearly what you are doing, that does not
>represent one's well-being), then there is some debate that the GST is
>really that regressive, given the rebate built into the Income Tax. I would
>want to see the figures as proof. I still say that those who spend more, pay
>more and that savers are only those at the very top end of the income scale
>which means it is probably both regressive and progressive with respect to
>income, depending on where you are on the income scale. I have some work on
>the Family Consumer Expenditure Survey data which shows who saves and who
>does not and they are the only ones who opt out of paying the GST, except
>those who spend their whole income on exempted itesm (the really poor).
>
>I know the GST is a hated tax but it does not help that people have been
>duped by How to Lie with Statistics - which is what your answer was all
>about.
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>
  I see your point, but it doesn't credit your argument to accuse me
of lying with stats (I don't see any statistics in my argument).  As you
admit, it is possible for a sales tax to be regresive.  I know what a 
regressive tax is.  And I contend that, in general, a sales tax will consume
a greater percentage of a poorer person's income.  In general, people
with lower incomes spend a greater percentage of it in the marketplace, while
people with higher incomes tend to invest and save more.  This means that 
the poorer person is spending a greater portion of his/her income on 
taxable goods and services.  And this, in turn, means that a greater percentage
of the poorer person's income will be spent on taxes on these goods and 
services.  Obviously, the person with a greater income spends more in absolute
terms on a GST.  But the person with a lower income spends more in relative
terms -- a greater percentage.

>


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