Finance: What is a Consumption Tax?


Finance a la shmoop, what is a
consumption tax? Ah consumption wasn’t that a
[Woman coughs up a dolphin] disease in the 17th century like you
know your lungs filled up with water,
[Woman banging her chest] couldn’t be a tax on that… Hmm, like how
would they ever collect. Well in fact a consumption tax in finance land is about
taxing what you consume yeah duh so continuing from the 17th century and
then 18th centuries remember that Boston Tea Party thing, yeah that thing. Well the
Brits wanted to tax American tea like a
[Bags of tea leaves] farthing per bushel or whatever the
currency and measures were back then but that was a tax per unit or per element
of consumption, yeah consumption tax. Gas
[Someone pouring tea out of a pot] tax,
that’s a consumption tax, gas is 3 bucks
[Someone filling up their car] a gallon or so and the tax is per gallon
something like 80 cents give or take in a red state and more than that in the
blue so the more gas you consume the
[States shown on the map] more tax you pay. All right consumption
tax, real estate well it’s usually taxed
[Guy pointing at a list of consumption taxes on a whiteboard] based on the market value of the place
you just bought, buy a more expensive house and well you’ll pay a higher
amount of tax so what’s a non consumption tax if all those are
consumption taxes. Well income tax for one you’re not consuming anything your
yearly tax bill isn’t based on how much
[Cup of tea is knocked out by yearly tax bill] stuff you buy but how much dough you
made. Well same with a payroll tax
[Money being counted for the tax bill] payroll tax is based on how much money
someone makes at a job and the conditions of their employment again not
about the consumption of any goods or
[Guy eating a burger] service you know other than all your
free time… All right well the estate tax is another example unless Congress
passes a bill the taxes are zombiefied brethren based on the amount of brains
they consume all the estate tax is based
[Girl counting her money] on income sort of definitions of income
are squishy.. rather than consumption so yeah that’s kind of an iffy one. All
right then again those zombies have been dodging the IRS for a while now and you
know we got to make them pay their fair
[Guy in a suit looks scared of the zombies] share let’s say they foot the tax bill
for the next being how about that, no but
[The guy in a suit is chased away] that’s not gonna work everyone knows you
know the zombies well they’re a bunch of
[Guy on the floor with his head cracked open] deadbeats

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