Opinion; The Independentarian


This essay was originally published in the USBIG NewsFlash in February 2008.


The unexpected success of Mike Huckabee in the Republican primaries has given a substantial boost to the small movement to replace all federal taxes with a national sales tax with an accompanying tax rebate in the form of a partial basic income (see story above). The basic income movement has been almost an entirely left-of-center movement since the 1980s, made up of mostly of people who want an equal society with much better, freer lives for the poor. I believe that most basic income supporters would like to have an ally on the other side of the political divide. Is the sales tax movement such an ally? Although I have no doubt that a basic income as small as the one proposed by the sales tax movement would be better than no basic income at all, there are two main reasons why the sales tax movement promotes something that is very difficult for most basic income supporters to endorse.

First, the stress of the sales tax movement is almost entirely on the benefits of income tax relief. The tax rebate is included almost as an afterthought to cushion the blow on the poor, who currently pay little or no income taxes and would stand to lose significantly by a shift to sales taxes. Any motivation to help provide basic economic security is left out of the movement’s literature. The poor are expected to work, and adequate work is assumed to be available in the job market. As the sales tax movement sees it, the poor only have one problem—the government makes them pay taxes. If the government rebates their taxes, private employment provides everything they need. Even if we disagree with the motives of sales tax advocates, and even if their basic income is far too small, it is better to get some of what we want than nothing. That is, as long as the cost is not too high, which brings me to the next reason.

Second, sales tax advocates would only support a small basic income as part of a shift to the national sales tax, which supporters call “the fair tax.” But the sales tax has significant problems. The three most obvious measures of an individual’s economic standing are income, wealth, and consumption. Any one of these measures could provide a base for taxation: an income tax is obviously a tax on income; capital gains, wealth, and inheritance taxes fall on wealth; and a sales tax falls on consumption. What difference would it make to base federal taxation on sales? Savings (i.e. the accumulation of wealth) is the difference between income and consumption. If you make $30,000 and save $3,000, you spend $27,000. An income tax would tax you based on how much money you make; a sales tax would tax you based on the portion of that money you spend that year. Sales tax advocates call this fair because it encourages savings and because it supposedly taxes people how what they actually consume rather than on what they are able to consume.

For most of us, there is no a big difference between income and savings. The poorest people tend to spend all of their income, and members of the middle class are lucky if they can put away 10 percent. But at higher levels of economic well-being, there is an enormous difference. The richer one is; the less one spends as a percentage of income. Therefore, the “fair” tax is regressive, making after tax incomes between the middle class and the wealthy less equal than before tax incomes. Supporters argue (fairly) that it will be no more regressive than the current system with all of its exemptions, but the sale tax is simply not a mechanism capable of making the system progressive. A government financed by a national sales tax will allow families to accumulate more and more wealth and the power that goes with it. They will be able to pass that wealth down for generations and generations with no interference from income or wealth taxation.

Sales tax advocates say that it is fair to tax people on what they actually consume rather than their potential to consume. Yet, the holding of wealth takes up resources that other people might as much as consumption does. If my family holds land as wealth, we block anyone else from using that land, but we would pay no sales tax on it. Under a sales tax, if a middle class man spends $50 to buy his son a baseball glove, he pays tax. But if a wealthy man spends $50 million to buy his son a professional baseball team—that’s investment spending, not consumption—he pays no tax. This is the “fair tax” in name only.

Even so, a national sales tax could be part of an overall progressive system if it was accompanied by a substantial basic income and some kind of tax that hits large dynastic family accumulations of wealth. Inheritance taxes and capital gains taxes don’t actually do that job very well, but there are two taxes that could, a tax on land value or a tax directly on wealth holdings (see Top Heavy by Ed Wolff). However, I fear that sales tax advocates would resist any changes in their preferred system that would make it progressive.

-Karl Widerquist, Oxford UK, February 2008

Karl Widerquist

About Karl Widerquist

Karl Widerquist has written 937 articles.

Karl Widerquist is an Associate Professor of political philosophy at SFS-Qatar, Georgetown University, specializing in distributive justice—the ethics of who has what. Much of his work involves Universal Basic Income (UBI). He is a co-founder of the U.S. Basic Income Guarantee Network (USBIG). He served as co-chair of the Basic Income Earth Network (BIEN) for 7 years, and now serves as vice-chair. He was the Editor of the USBIG NewsFlash for 15 years and of the BIEN NewsFlash for 4 years. He is a cofounder of BIEN’s news website, Basic Income News, the main source of just-the-facts reporting on UBI worldwide. He is a cofounder and editor of the journal Basic Income Studies, the only academic journal devoted to research on UBI. Widerquist has published several books and many articles on UBI both in academic journals and in the popular media. He has appeared on or been quoted by many major media outlets, such as NPR’s On Point, NPR’s Marketplace, PRI’s the World, CNBC, Al-Jazeera, 538, Vice, Dissent, the New York Times, Forbes, the Financial Times, and the Atlantic Monthly, which called him “a leader of the worldwide basic income movement.” Widerquist holds two doctorates—one in Political Theory form Oxford University (2006) and one in Economics from the City University of New York (1996). He has published seven books, including Prehistoric Myths in Modern Political Philosophy (Edinburgh University Press 2017, coauthored by Grant S. McCall) and Independence, Propertylessness, and Basic Income: A Theory of Freedom as the Power to Say No (Palgrave Macmillan 2013). He has published more than a twenty scholarly articles and book chapters. Most Karl Widerquist’s writing is available on his “Selected Works” website (works.bepress.com/widerquist/). More information about him is available on his BIEN profile and on Wikipedia. He writes the blog "the Indepentarian" for Basic Income News.

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The views expressed in this Op-Ed piece are solely those of the author and do not necessarily represent the view of Basic Income News or BIEN. BIEN and Basic Income News do not endorse any particular policy, but Basic Income News welcomes discussion from all points of view in its Op-Ed section.

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