@mattbrowne In addition to the VAT taxes, is there also an income tax in Germany?
My point about doing away with US income tax is that there are so many loopholes, deductions, and barely legal ways to get over on the system, that the rich don’t end up paying the percentage they’re supposed to anyway.
This is not just a problem pointed at the uber rich. Any self employed business person understands that they can get over on the tax code by keeping their personal wealth low while keeping business profits high and reinvesting the profits back into material assets for the business to show no profit on paper. And no paid on the material asset because it’s viewed as a “business expense”.
So lets say I bill a client $1000 for services rendered. Three months pass and they call to let me know my bill is too low because they need to show a loss on the job. This not only benefits their profit/loss deductions on taxes, but in ensures they will get the same budget number to work with in the next year. They end up paying $4000 for a $1000 bill, just so they can claim a loss.
What do I do with the extra cash? Putting it in the bank only causes me to pay more taxes. Now I’ve got to seek a shelter too. The best solution is to purchase equipment, a material asset which not only depreciates, but is as good as gold if needed to sell. It’s like putting the money in a holding pattern that pushes the tax away until the depreciation nullifies it.
So my little scenario is no different than a major corporation investing profits in low income housing, or green technologies, or anything that looks good to the public, and shows great potential for creating jobs… but the real reason for the investment is simply to hide the money.
All this could be overcome with a pure consumption tax. Investments would be made purely on the profit potential, and the tax would be collected at every transaction along the way. GE would have to pay consumption tax on every nail and stick of lumber purchased to build the low income housing project they create as a tax shelter. And they would have more incentive to make it profitable, rather than hope it goes belly up in failure just to achieve the loss required for deductions.