Talk:Indirect tax

This entry is completely incorrect. An economist with some spare time on his or her hands should write a proper entry. I have no idea why anyone who thinks that a sales tax is an "indirect tax" would submit an entry on this topic. Indirect taxes are paid as higher prices; direct taxes as taxes.

[Note: The above comment was posted by an anonymous user at IP 72.137.63.75 on 16 June 2006.]

Editor's note: The comment that the "entry" (the main article) is "completely incorrect" is itself incorrect. An economist with spare time on his or her hands is certainly welcome to take a crack at this or any other article in Wikipedia. However, the term "indirect tax," while it may have a different meaning to the anonymous user, is a legal term, and has technical legal meanings that are correctly described in the article. The senses in which the anonymous user is ascribing to the terms direct taxes and indirect taxes are separate senses. Perhaps those can be discussed in the article as well.

If you will look at any large, unabridged dictionary of the English language, you will find that many words have multiple meanings. Terms like "direct tax" and "indirect tax," as stated above, also have technical legal meanings -- and the user at IP 72.137.63.75 apparently is not familiar with the technical legal use of these terms. Yours, Famspear 15:17, 16 June 2006 (UTC)[reply]

I think the user in question is indeed familiar with the technical legal usage of these terms in the rest of the common law world. The entry's definition is entirely America-centric. —Preceding unsigned comment added by 99.252.62.154 (talk) 14:40, 16 April 2010 (UTC)[reply]

I moved the following language from the article:

Indirect taxes are not proportional to the income of the tax-payer. i.e. If a wealthy person and a poorer person were to buy the same goods, costing the same amount, the poorer person would pay a greater amount of their income as they would be taxed the same amount as the wealthy taxpayer.

First of all, the discussion could apply just as well to direct taxes (such as, in the United States, a national property tax -- if there were such a thing). Second, the discussion seems to be confusing various concepts. We need to determine what kind of indirect tax we're talking about first. An income tax? Gasoline excise tax? Sales tax? National tax? State tax? Which country?

If a rich person and a poor person buy the same goods costing the same amount, the rich person is of course using a lower PERCENTAGE of his or her money (a lower percentage of income, if you like) than is the poor person. Indeed, that's true even if no sales tax or other tax at all is imposed. If we are talking about the SALES TAX on that particular item, it is also true that for the rich person, the ratio of the dollar amount of the sales tax to the rich person's income (i.e., the higher income person, which is what I assume was meant) is going to be lower than the ratio of that same dollar amount of sales tax is to the income of the poorer person.

If on the other hand we're talking about income taxes, then it somewhat confuses the issue to be talking about buying goods. Assuming an absolutely flat single rate of tax, with no special income exclusions, deductions or credits for anyone (which, of course, is not the case in the USA), both the rich person and the poor person would being paying at the same proportion.

Maybe the material can be re-worked (?). Famspear 19:46, 25 January 2007 (UTC)[reply]

I removed a recent edit regarding the definition of direct versus indirect, for the following reasons. The following material was the source material, and is found in Encycl. Britannica regarding direct versus indirect taxes:

In the literature of public finance, taxes have been classified in various ways according to who pays for them, who bears the ultimate burden of them, the extent to which the burden can be shifted, and various other criteria. Taxes are most commonly classified as either direct or indirect, an example of the former type being the income tax and of the latter the sales tax. There is much disagreement among economists as to the criteria for distinguishing between direct and indirect taxes, and it is unclear into which category certain taxes, such as corporate income tax or property tax, should fall. It is usually said that a direct tax is one that cannot be shifted by the taxpayer to someone else, whereas an indirect tax can be.

The above discussion is not a discussion of the terms direct tax and indirect tax in the U.S. Constitutional law sense. This is a discussion regarding the "literature of public finance."

By contrast, legal scholars and, more importantly, the U.S. courts, have rejected the concept of a direct tax as being one that cannot be shifted to someone else.

Under the U.S. legal system, a federal direct tax is simply either a capitation (a head tax) or a "tax on property by reason of its ownership." Anything that does not fall into those two categories is an indirect tax. Period. From about 1895 to 1913, taxes on income from property were also treated as direct taxes, but that treatment ended with the Sixteenth Amendment in 1913.

Perhaps the removed material (on which the above quotation appears to be have been based) can be modified, however, to clarify the difference between a theoretical "public finance" view of direct taxes and the separate legal (constitutional law concept) of direct taxes. Yours, Famspear (talk) 17:26, 18 June 2008 (UTC)[reply]

OK, I've reworked the material and added it back, with some reorganization. Famspear (talk) 18:23, 18 June 2008 (UTC)[reply]

You are misinterpreting the literature and cases. That "literature of public finance" goes back to the 18th century, and informs the meaning of the terms as understood by the Framers. Do you think they introduced new terms in the Constitution that were not in common usage at the time? Any discussion of the meaning must begin with how they understood and used them. If courts later tried to change those meanings then that change should be noted. In fact, the courts did not change the meanings. They struggled to try to understand them, and did so by trying to find examples. If a court says it can only find head and property taxes as examples of direct taxes, that is not a change of the underlying definition, any more than finding only the examples of poodles and pointers would change the underlying definition of dogs, or that anything that is not a poodle or a pointer is not a dog. Nor did the court rule that no other examples might be found in some future case. A tax on breathing air would be direct even though the air was not the property of the breather before the breath is taken. Judges are not, in general, legal historians or philosophers. They are under pressure to quickly decide among positions presented to them, none of which may be competently argued.

If the Framers had meant "direct tax" to consist only of head or property taxes, they would have said so. It is not as though they hadn't thought of those examples. That they chose a more abstract term shows they intended a distinction that might include other examples they hadn't thought of. It is the job of competent scholars to research the historical record to try to discern what they meant. But I agree we could use more cites to support my position and I will provide those as future edits in support of this position. In the meantime, I would appreciate leaving my edits in place, as they are historically correct. Bracton (talk) 16:31, 25 June 2008 (UTC)[reply]

Dear Bracton: You would be correct to say that if a court says it "can only find" head and property taxes as "examples" of direct taxes, that might not be a "change" of the "underlying definition." However, that is not the situation here. The courts have made definitive rulings on the subject, and have done so for many years.

With perhaps two possible exceptions, the U.S. federal courts have ruled that "direct" taxes in the legal sense -- the U.S. constitutional law sense -- are indeed limited to "capitations" and "taxes on property by reason of ownership". The views of historians are "interesting" for a historical perspective, but historians, as historians, cannot render official legal rulings about what is or is not a direct tax in the legal sense. Courts of law can and do render such rulings. There are, as far as I know, two federal court cases where the courts ruled that a particular U.S. federal income tax was treated as a "direct" tax. One of those cases was later overruled, and the other case remains as a distinct minority position.

Whether a particular tax is a "direct" tax in the U.S. constitutional law sense is not a "historical" issue; it is a legal issue. And the courts have already decided that issue. Over and over and over. Under the rules of Wikipedia, we are not free, as Wikipedia editors, to substitute our own views about that merely because we believe the courts are "wrong" on "history," and we are not free to confuse someone's theory about some sort of historical definition of direct tax and the actual legal definition that has been set by the courts. The U.S. courts have rejected the numerous "historical" definitions. Whether the courts are "right" or "wrong" about "history" makes no difference; under the U.S. legal system, the law is what the courts rule the law to be. Yours, Famspear (talk) 16:48, 25 June 2008 (UTC)[reply]

PS: I have responded similarly on the talk page for Direct tax. I would suggest we just continue the dialog there. Yours, Famspear (talk) 16:56, 25 June 2008 (UTC)[reply]

First of all, This article was written with clear bias. Secondly, it is NOT true that an indirect tax is "Transfered to others". In the case of sales tax, it is simply the buyers burden. That does not mean it has been "transfered" from anyone. It means that the buyer of the goods has the burden of paying the tax. If he resells the item, the next buyer will carry the burden, etc. (this also is not a "transfer" of tax. Thirdly, tax does not exist except when it is being levied. In the sales tax system, it is levied at the time of sale. In addition, any comments about indirect tax being "greater" if you have lower income or any other politically charged/ biased opinions have no place in this article. — Preceding unsigned comment added by 71.191.143.44 (talk) 20:12, 4 March 2014 (UTC)[reply]

The explanation of proportion in this article is correct, but it draws the incorrect conclusion that a higher income is automatically unjust compared to a lower income, simply because of the relative tax payments. — Preceding unsigned comment added by 2003:E5:9F0C:68D6:214:51FF:FE79:DB3B (talk) 07:18, 11 September 2019 (UTC)[reply]

Part of the problem is that some parts of the article are not adequately sourced. Famspear (talk) 18:07, 11 September 2019 (UTC)[reply]