On the subject of a sales tax, a member of the studio audience brought up the fact that the US government tried a small luxury tax in the early 1990s.
Three years later, it was judged to be a failure and repealed.
I should note that it was considered a failure by a Republican congress. However, the reasons offered for considering it a failure deserve some consideration. At the start, I need to remind the reader that this is a blog on ethics. I focus on how things ought to be. I have argued that the dollars that pay for government-provided public goods and basic welfare ought to be the dollars that fulfill the least and weakest desires. Given the law of diminishing returns, these are the last dollars of the richest people.
But, in the real world, we routinely run into people who are immoral.
We can conclude that torturing innocent people is evil. But, what does this proof do for the person who has been kidnapped by some sadist who has strapped him to a table and is starting to pull out his instruments of torture?
A sales tax that excludes basic welfare goods (food, medicine, basic shelter, basic clothing) has a lot to recommend it morally. However, some people are immoral, and their immoral behavior may create problems.
Well, immoral behavior, by its very nature, does create problems. There is no reason to call behavior that creates no problems immoral.
The luxury tax of the early 1990s is said to have failed because the very rich - the people whose dollars were fulfilling the fewest and weakest desires, were too selfish to allow that money go to providing government public goods and basic welfare (turning them into dollars that fulfill more and stronger dollars).
They quit purchasing goods in the land that has the sales tax and made their purchases in lands that did not have that tax. This left the middle class (those whose dollars fulfill more and stronger desires) to pay for the public goods and basic welfare that the wealthy refuse to provide.
Furthermore, when the wealthy took their money to other countries to make purchases, this cost jobs in local businesses that cater to the rich.
I want the reader to note that this problem is not unique to the sales tax. It is true of all forms of taxation. The very wealthy have a way to avoid those taxes - because they have a freedom the rest of us do not have to move their economic activity to other regions.
If there is a property tax, they buy property elsewhere. If it is an income tax, they arrange to get their income elsewhere. If it is a capital gains tax, they will buy and sell their assets in foreign markets.
Note that this is not a tax loophole. Closing tax loopholes alone will not bring this business back into the country. In fact, closing tax loopholes will do harm. These business leaders are simply going to move their activity from the country that closes the loopholes to a country that maintains them. In short, it will drive business away.
Actually, this is a lot easier to see with respect to regulation - though all of the basic underlying principles are the same.
Take a corporate leader who really does not care about the fact that the methods for creating his product kill, maim, or sicken others or destroys their property. He wants the liberty to conduct these activities anyway and he does not want to pay any compensation for harms done. Instead, he wants to pocket all of the profits including the money that would have gone to compensation.
Assuming that he is wealthy enough, he simply farms out his operation to whatever government will refuse to regulate those activities. If the harms are global rather than local, this becomes much easier to pull off.
We can take greenhouse gas emissions for an example. These are activities that kill, maim, and sicken others and harm their property. If one country decides to restrict or tax these emissions, the international business leader instead moves his business to a country that offers no restrictions. The country that gets the jobs will still suffer the harms of global warming - but they at least have jobs available while they are being harmed. Countries that refuse this deal also still get the harms, but do not get the benefits of jobs.
In many industries, the wealthy have the opportunity to bid out their activities in this way. They will build their business in those areas where the people ask for the least contribution of their dollars to public goods and basic welfare, and give them the greatest freedom to harm others without demanding that compensation be given. The country that puts in the winning bid gets the company with its jobs. All other countries get the global harm done and nothing else.
In fact, a business can add another element to this bidding process. "How willing are you to tax your middle class to provide me with an economic incentive - a payoff - to build my factory in your country? To get my business, you have to show a willingness to cut your college education funds and social security to make sure that my business is bailed out if I should make a lot of foolish business decisions."
This bidding puts more wealth into the pockets of the wealthy - often transferring it directly from the pockets of the poor and middle class. And the more wealth these people accumulate, the more freedom they have to engage in this type of bargaining. And the more freedom they have to engage in this type of bargaining, the wealthier they become.
To make matters worse, we can well expect that the people who have the profits from harming others without compensation, obtaining government "economic incentives", and refusing to contribute to public goods and basic welfare, will economically dominate competitors that accept these costs. Good companies finish last.
So . . . regulation, sales tax, income tax, property tax, capital gains tax, business incentives, environmental regulations, worker safety . . . all of these are subject to this phenomenon. It is not a problem unique to the sales/luxury tax, and it is not a reason to preferring some other option over and above the sales or luxury tax.
So, there you are, strapped to the table by the sadistic killer who is starting to gather his instruments of torture. The person strapped to the next table has given you an argument that demonstrates that sadistic desires are immoral - they are desires that people generally have many and strong reasons to inhibit through condemnation and punishment. You know this to be true.
But it is not going to help.
It is just a fact of the world around us that, where morality fails, people suffer the consequences. We have all been victims, of one degree to another, of moral failure. The more moral failure we allow, the more suffering results. The moral failure of allowing evil people to make economic bargains across nations of the type mentioned above threatens a great deal of widespread suffering. It is a situation that people generally have many and strong reasons to prevent.