I dont know a lot how value added taxes work but I know many other developed countries use that a lot more than we do. Which affects even lower income people. I know I dont like the idea of an income tax on below average income but a property tax or value added tax or some sort of sales tax could work where they are only taxed for participating in the economy and not just for trying to survive
Yes — I think you're identifying an important distinction between taxing income necessary for basic living and taxing economic consumption/activity.
A VAT (value-added tax) is essentially a tax collected at each stage of production, but economically it ends up being a tax on consumption. For example:
A company buys materials for $100 and sells a product for $150.
It has added $50 of value.
A VAT applies to that added value.
Ultimately, the consumer bears most of the tax through the price.
The big advantage of a VAT is that it doesn't care whether your income came from wages, investments, or something else. You're taxed when you consume goods and services, rather than simply because you earned money.
But your concern about lower-income people is exactly the catch
A VAT is generally regressive relative to income because poorer households spend a larger percentage of their income.
Imagine:
Household Income Consumption 10% VAT
Low income $30k $29k $2,900
Middle income $75k $60k $6,000
High income $300k $150k $15,000
The wealthy person pays much more in dollars, but only 5% of their income is being subjected to the tax through consumption, compared with almost 10% for the low-income household.
So I wouldn't favor a pure VAT with no compensation for poorer households.
There's a way to build the system around the principle you're describing
You could have:
1. No or very low income tax on low incomes.
Someone earning $20k–$30k shouldn't necessarily have their basic ability to live taxed heavily.
2. A broad consumption tax/VAT.
Everyone contributes when purchasing things in the economy.
3. Exempt or zero-rate necessities.
For example, potentially:
basic groceries
essential medical care
perhaps rent or housing-related necessities
Although exemptions have their own problems, because they complicate the system.
4. A substantial refundable tax credit/basic income.
This is probably the cleanest solution. Everyone receives, say, $3,000–$5,000 annually, which offsets the VAT on basic consumption. As a result, the effective VAT burden rises with consumption.
5. Progressive taxation of higher incomes and/or wealth.
Then you preserve progressivity at the top without requiring someone barely getting by to pay substantial income tax.
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And there's an interesting philosophical difference here.
Your principle seems to be something like:
> People shouldn't be heavily taxed merely for possessing the income necessary to sustain themselves; taxation should fall more heavily on discretionary consumption, accumulated wealth, and higher economic capacity.
That's actually quite different from saying "taxes should be low."
You could have a relatively high-tax society while still designing it around that principle.
For example, imagine:
$25,000 income: essentially no net income tax
$50,000 income: modest taxation
$100,000 income: substantial taxation
$500,000 income: very substantial taxation
while everyone simultaneously pays a consumption tax when buying things.
That would produce a system where participating in consumption contributes to government, while simply earning enough money to survive doesn't automatically create a large tax burden.
One caveat: property tax is somewhat different from VAT. Property taxes fall on ownership of an asset rather than consumption. They can actually fit your philosophy if you think people who possess valuable land/property should contribute to the public infrastructure that makes that property valuable, but they can also be burdensome for someone who is "asset rich but income poor."
So I think your intuition is quite defensible, but I'd distinguish three principles:
Income tax: "You earned money → government takes a portion."
VAT/sales tax: "You consumed something → government takes a portion."
Property/wealth tax: "You possess valuable assets → government takes a portion."
A well-designed system could combine all three while making sure the first dollars necessary for survival are largely protected.
And that's actually one reason many developed countries can have relatively high VATs and still have fairly strong redistribution: the VAT isn't necessarily operating by itself; it's embedded in a much larger tax-and-transfer system.
But America’s national debt has been the highest in the world for decades.
