> Instead they should think about systems where such a breach is just not possible.
The underlying problem is the existence of centralized identity, as opposed to decentralized identity. It's the practice of identifying people by a single global identifier (e.g. SSN) instead of having your bank identify you with your bank card and your employer identify you with your employee ID.
People are focused on identity theft here, but there are two points about that. The first is that identity theft doesn't exist without centralized identity, and the second is that identity theft isn't even the main issue.
Centralized databases know very private things about you. They know if you've paid for services at an abortion clinic or a cancer treatment center or a mental health facility. They know if you've ever been on the payroll of a police department, or paid tuition at a police academy, even if you're currently working undercover. They know whether you patronize gay establishments, even if you're in the closet. They know your current address, even if you have a crazy ex who doesn't.
That kind of information is inherently dangerous. In the wrong hands it can get innocent people fired or blackmailed or killed. Which means any central database containing all of it for everyone is inherently a huge vulnerability waiting to be exploited. And none of that goes away even if you replace the SSN with some kind of public key that doesn't itself need to be kept secret.
But centralized identity is the linchpin of those databases and it isn't really needed for anything else. So we should get rid of it.
> The underlying problem is the existence of centralized identity, as opposed to decentralized identity.
There is also an underlying problem of reliance upon publicly available information (and in many cases, one's SSN is publicly available, even before this breach) to authenticate that human body X claiming to be John Smith is in fact actually the John Smith.
Public facts, such as SSN, mothers maiden name, or name of first employer, etc. have been relied upon as "secret, known only to John Smith" items for authentication purposes when in reality those facts were never really secret in the first place. The only reason those facts even worked as authentication devices is that pre-internet/pre-google it was exceedingly hard to look most of them up in the public records. Doing so often involved physical travel to multiple disparate archives and physical search through archived paper. And so if unknown human X knew all three it was highly likely X was John Smith because otherwise X had put in an awful lot of effort. Today, with the internet/google, obtaining almost all of these facts from the public records where they have always existed to begin with involves typing in searches, zero physical travel, and no combing through archived paper.
The internet has simply exposed the Emperor's New Clothes [1] for what they really were all along.
There is no reason to have Bank A release your credit history with them to Equifax just so Equifax can release it to Bank B. Cut out the middle man and just ask Bank A release the information to Bank B.
But how does Bank A know to ask Bank B? That’s what Equifax and friends help with: aggregating the data (and then putting a number to it). It’s a great idea, but how would you implement it? If you cut out the middleman, banks will just form their own centralized system that holds all that data making it easier to access, and... oh, we’re right back where we started.
Because you tell them to. When you're applying for credit with a new bank, you ask the existing bank to vouch for your history of making timely payments.
In theory the person applying for credit could keep one set of accounts that they always pay and another set which is delinquent but not disclosed, but not disclosing delinquent accounts would be fraud and anyone willing to commit fraud has been able to commit identity theft this whole time without the system collapsing.
Some taxes are made difficult by the lack, but land taxes, wheel taxes, property taxes, sales taxes, VAT taxes, GET taxes, service taxes, recycling taxes, employment taxes, gas taxes, hotel taxes, ticket taxes, vice taxes, excise taxes, fishing/hunting/sport license taxes, food and beverage taxes, marriage license taxes, luxury taxes, parking taxes, stadium taxes, vehicle taxes, watercraft registration taxes, zoning permit taxes and tolls are all capable of being effected without a centralized identity.
> There's no way a VAT or flat tax would be progressive enough to fund the government without crippling vast portions of the taxpaying base.
That's what the UBI is for. You can have something like a 35% VAT with a $15K/year UBI and then the effective rate on someone at $60K/year is 10%, but at $100K/year it's 20% and it only goes up from there. This is very much in line with the existing effective rates, and you can make them whatever you want by adjusting the tax rate and the amount of the UBI.
It also replaces a huge swath of social spending programs because you're then giving someone who makes $20,000 a year $8000 more than they pay in taxes.
I don’t think it is possible. The effective tax rate for billionaires under a scheme such as you propose would still be pretty much zero. The only way to make that a progressive tax scheme is to have zero or negative tax revenue.
If they spend the money they would have to pay VAT. If they invest it in something then the invested in company spends it and they would have to pay VAT. The only way to avoid it is to stick the cash in a mattress, which nobody really does because it's more profitable to make $1 in profit at the cost of paying $.35 in VAT than to make no profit and pay no taxes.
They could avoid local taxes by investing offshore, but they do that already.
I think you're misunderstanding me. I'm not denying you can raise income through VAT, I'm saying you can't do it in a progressive manner, basic income or no basic income. The reason for this is that the more you earn, the less you spend as a proportion of your income. Billionaires spend almost nothing compared to either their income or their wealth. The poorest in society spend everything, because some things are essential.
Any progressive system would make it so that the less well off paid _at most_ as much as the 1%.* Income tax may not work very well, but it's one of the most progressive forms of taxation there is.
*And yeah, as you point out, tax avoidance makes a mockery of this anyway.
> The reason for this is that the more you earn, the less you spend as a proportion of your income. Billionaires spend almost nothing compared to either their income or their wealth. The poorest in society spend everything, because some things are essential.
That's only true when you crib the definition of spending to mean only personal consumption.
Donald Trump owns Trump Tower. It generates rental income. He is obviously not spending all of it on hamburgers and hair products for his own personal self.
But it still gets spent, just not on himself. He doesn't put the cash in a mattress, he uses it to go out and build another tower somewhere. For that he has to buy steel and concrete and elevators and HVAC systems, which are all taxed in the usual way. Essentially all of the "unspent" income is spent doing things like this, because it's more profitable than holding cash that generates no returns.
Most of the time there will be a corporation in the middle. Trump doesn't buy concrete, he buys shares in a newly formed corporation which uses the money to buy concrete. But that doesn't change the fact that the money is used to buy concrete and concrete is subject to VAT.
Concrete is subject to VAT, but it's _reclaimable_ when you charge rents for rooms. The effective rate of VAT for successful businesses is zero. This is by design and is why it's so efficient: each part of the chain has an interest in making sure it's collected as opposed to a sales tax like India has.
In short, Donald Trump's net VAT bill is pretty much exactly his VAT on personal consumption. (It could be lower, depending on how exactly his personal finances are laid out wrt his business's expenses, but it won't be higher.)
> Concrete is subject to VAT, but it's _reclaimable_ when you charge rents for rooms.
That just prevents it from being charged twice. It's the same thing as saying that the tenant doesn't have to pay the VAT that the landlord has already paid.
> The effective rate of VAT for successful businesses is zero.
There is clearly some kind of fallacy happening if a transaction occurs, the government receives non-zero tax revenue, yet the effective rate is calculated as zero.
Income taxes and consumption taxes are effectively the same thing. The seller's income is the buyer's consumption. The taxes always come out of the surplus between the seller's cost of production and the value to the buyer, and who really pays depends on who would otherwise have had the market power to claim that part of the surplus, not whether you call the tax an income tax or a consumption tax.
In practice VAT is very similar to corporate income tax. The main difference (and benefit) is that VAT is paid to the jurisdiction where the end product is sold, rather than whatever arbitrary jurisdiction the company arranges for its profits to be declared in.
> That just prevents it from being charged twice. It's the same thing as saying that the tenant doesn't have to pay the VAT that the landlord has already paid.
Well, no it's not. If you rent a room from Trump, it matters a lot whether you pay the VAT for the concrete or Trump does. And you're the one who ultimately pays. Trump pays and reclaims. You don't get to reclaim.
I get that you might not be concerned with who ultimately pays for this stuff, but it matters greatly if you're trying to design a progressive tax system.
> If you rent a room from Trump, it matters a lot whether you pay the VAT for the concrete or Trump does. And you're the one who ultimately pays. Trump pays and reclaims. You don't get to reclaim.
Who pays the tax has nothing to do with who can reclaim what.
Suppose Trump has a local real estate monopoly. Then rents are high and the surplus is going to Trump. Any tax paid by anyone is really paid by Trump, because if it was "paid" by the tenants and Trump didn't lower rents by the same amount to compensate, the tenants would move out of the city because the rental cost would exceed the value of the real estate.
Now suppose the local real estate market is highly competitive. The rents are low and the surplus is going to tenants. Any tax paid by anyone is really paid by the tenants, because if it was "paid" by the landlords and they didn't raise rents by the same amount to compensate, the rents wouldn't be enough to cover costs.
Taxes are always paid out of surplus. Whoever would otherwise be getting the surplus is the one really paying the tax. If part of the surplus was going to landlords and part to tenants, they would each be paying part of the tax.
Now notice what happens with VAT. If Trump has a monopoly then he pays $100 in construction and the tenant pays $500 to rent, and VAT is owed on $500. If Trump is in a competitive market then he pays $100 in construction and the tenant pays $120 to rent, and VAT is owed on $120 even though the rental was worth $500 to the tenant, and the tenant gets to keep the $380 difference untaxed. So who pays VAT and who doesn't? It isn't collected on the surplus going to the buyer.
Dunno, 1% of the world seem to hold 50% of the assets. That sounds like a pretty big impact to me.
Obviously, I'm assuming for the moment that billionaires aren't chronic tax avoiders, which makes every system regressive. If you decide to only concentrate on the proportion of the population that pays their fair share, you'd still have problems, because the average person who earns $200k doesn't spend much more than the guy earning $150k. They'd also receive the same basic income, so the burden would be higher on the guy earning $150k.
> Dunno, 1% of the world seem to hold 50% of the assets. That sounds like a pretty big impact to me.
Billionares aren't the 1%, they're the <0.0002%.
> the average person who earns $200k doesn't spend much more than the guy earning $150k
Yes they do. Someone who makes $200 million doesn't have much more personal consumption than someone who makes $150 million, but that effect doesn't kick in until you're at the "don't know how to spend this much money" level. At $200K/year you haven't even sent all your kids to private school yet, much less bought a mansion with a heliport and a fleet of sports cars.
Then perhaps tax processing should be the exception and use of the unique tax identifier for other puposea made illegal. IMHO, it would not be an impossible task to generate a unique tax identifier for each person that is kept private to the government
and then print a unique identifier on tax forms sent to each person to use for filing (that changes every year).
The identifier isn't great, but it's the pervasive use of this identifier that is the problem.
Possible, maybe Easy? Not really. You have problems of homelessness, problems of enforcement cost, problems of beneficial ownership.
If a man is living in his ex-wife's house as part of a divorce settlement, and there's a 90% mortgage on the property, who should be paying? What's going to happen if it isn't paid to each party? Could a bad actor exploit this situation?
In terms of sheer complexity, Land Law is probably second only to Tort Law.
Bear in mind we're talking about these in the context of a no-identity scenario. This isn't about the practicalities of Land Taxation as it stands, but the practicalities of land taxation if you can't identify the owners or beneficial owners.
Consumption taxes (like sales taxes) are heavily regressive and result in the poor shouldering a much heavier share of the tax burdem than the wealthy, proportional to their share of income (let alone disposable income).
The underlying problem is the existence of centralized identity, as opposed to decentralized identity. It's the practice of identifying people by a single global identifier (e.g. SSN) instead of having your bank identify you with your bank card and your employer identify you with your employee ID.
People are focused on identity theft here, but there are two points about that. The first is that identity theft doesn't exist without centralized identity, and the second is that identity theft isn't even the main issue.
Centralized databases know very private things about you. They know if you've paid for services at an abortion clinic or a cancer treatment center or a mental health facility. They know if you've ever been on the payroll of a police department, or paid tuition at a police academy, even if you're currently working undercover. They know whether you patronize gay establishments, even if you're in the closet. They know your current address, even if you have a crazy ex who doesn't.
That kind of information is inherently dangerous. In the wrong hands it can get innocent people fired or blackmailed or killed. Which means any central database containing all of it for everyone is inherently a huge vulnerability waiting to be exploited. And none of that goes away even if you replace the SSN with some kind of public key that doesn't itself need to be kept secret.
But centralized identity is the linchpin of those databases and it isn't really needed for anything else. So we should get rid of it.