This is a solved problem, with different VAT rates. For instance in France there's a 2% rate for crucial things like medicine and some foods, 5% for other important things like electricity, 10% regular reduced rate and 20% for everything else. You can therefore easily target by saying this category of goods gets this VAT rate. E.g. jewelry being at 20% will only impact well off buyers.
I would hardly call it "solved". For the examples given:
>medicine
Semaglutide is a weight loss treatment that costs $10+k a year. It is ostensibly a luxury for the well-off. Does it fall under the 2% rate for medicine?
>and some foods
How is that determined? For instance, Parmigiano Reggiano DOP aged 48 months is arguably a luxury, but generic parmesan cheese isn't. Even if you could draw a line somewhere between the two, it's hardly trivial to do this for good ever. You either have to accept some absurd situations like the above, or have a sprawling bureaucracy tasked with determining what's a "luxury" or not.
> E.g. jewelry being at 20% will only impact well off buyers.
And what of a poor couple that's getting married? I agree such a tax might be approximate progressive (ie. on average the top 20% pays a higher tax than the bottom 20%), but it leaves much to be desired from a "fairness" perspective. A multi-millionaire driving a Corolla gets taxed more than some army recruit that just blew their signing bonus on a BMW. You also can't implement higher brackets on higher earning individuals as easily. How do you tax the likes of Bezos? It's not like they buy 100x more luxury items because they make 100x more. Most of their money is spent on investments, not consumption.
Your argument is based on ignorance of how sales tax/VAT codes work. Believe it or not, but tax people and businesses have been dealing with these issues for over a century now and they've mostly figured it out.
It is ostensibly a luxury for the well-off.
No, even for the well-off it is still a medicine.
Parmigiano Reggiano DOP aged 48 months is arguably a luxury, but generic parmesan cheese isn't.
In places where it matters, the sales tax codes can get as granular as they need to address this. They don't need a dedicated bureaucracy to make these determinations: it's either handled by the legislature or a very small team, since determinations like this are infrequent and don't require dedicated staff.
In this particular case: both DOP and regular generic parmesan are classified as foodstuffs by CA and neither would be subject to sales tax.
but it leaves much to be desired from a "fairness" perspective
Someone buying a budget car should be taxed less than someone buying a luxury car, regardless of the wealth or income of either buyer.
It's not like they buy 100x more luxury items because they make 100x more. Most of their money is spent on investments, not consumption.
Indirect taxes are not consumption taxes. They are transaction taxes, and investment transactions can be taxed under a sales tax, GST, or VAT regime. Some jurisdictions do tax investment transactions. In the U.S., taxing investment transactions has been proposed many many times over the past few decades. Wall Street have managed to beat off that proposal through profligate lobbying but every time the proposal pops up it gets more support...
> Semaglutide is a weight loss treatment that costs $10+k a year. It is ostensibly a luxury for the well-off. Does it fall under the 2% rate for medicine?
Trivially resolved. In France only medicine which can be reimbursed by social security (so only actual things that can be prescribed and work, not optional luxury or homeopathy crap).
> Parmigiano Reggiano DOP aged 48 months is arguably a luxury
In France I doubt there's any differentiation of fancy vs non-fancy versions of foods, let alone cheeses. It'd be insulting to the nation to contemplate such a thing.
> And what of a poor couple that's getting married
I didn't know jewellery was a prerequisite to getting married.
>(so only actual things that can be prescribed and work, not optional luxury or homeopathy crap).
I'm not sure what you're trying to say. Semaglutide has been approved (ie. has proven to work) for the treatment of obesity.
>In France I doubt there's any differentiation of fancy vs non-fancy versions of foods, let alone cheeses. It'd be insulting to the nation to contemplate such a thing.
Do you know this for a fact or just simply guessing? I find it very unlikely that France (or any other free market economy) doesn't practice product segmentation for foods.
>I didn't know jewellery was a prerequisite to getting married.
But poor and middle class people buy "luxury" stuff as well. When that happens, how is it fair that they're getting taxed the same as Bezos buying a mega-yach?
