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Governments have established that by creating rules and an environment where commerce can take place, they can collect taxes on that commerce. This implies tha

Governments have established that by creating rules and an environment where commerce can take place, they can collect taxes on that commerce. This implies that things like dividends should not be taxed, since no commerce occurs. All that happened is a piece of property split into two. Would you favor this outcome? If not, why not? Now personally, I'm in favor of eliminating all taxes on capital income (and capital, e.g. property taxes). Economically, the best tax is a consumption tax; you live in a home, you pay taxes on the value of living in it. No property tax, no income tax, etc. Potentially such taxes could also be levied at the time of purchase, as they would be with a pair of skis. But that's a political non-starter; our western systems of taxation are built around the lie that the rich benefit disproportionately from our society. A consumption tax, which taxes people based on the benefits they receive rather than the value they create for others, would automagically reveal that lie.

curun1r 11y ago
> This implies that things like dividends should not be taxed, since no commerce occurs. All that happened is a piece of property split into two. Would you favor this outcome? If not, why not? I'm fine with that, so long as the corporate tax side of the equation balances...companies use dividends to reduce their income and the taxes they pay. If a dividend is just splitting an asset in two, it shouldn't be deductible.
- yummyfajitas 11y ago
  Dividends are paid with after-tax income. You might be confusing them with distributions paid by pass-through entities (where corporate income is treated as personal income by the owners).
tomp 11y ago
> the lie that the rich benefit disproportionately from our society Why do you consider that a lie? There's a reason why kidnappers try to target rich people's kids... because rich people are willing to pay much more to gave their kid back - they literally value the kid's life more (in money terms). Another perspective is, a geting injured/killed will deprive a rich person of a lot of consumption, but a poor person of just a little consumption. Therefore, by protecting rich people, governments provide more value than by protecting poor people. > Now personally, I'm in favor of eliminating all taxes on capital income (and capital, e.g. property taxes). Economically, the best tax is a consumption tax; you live in a home, you pay taxes on the value of living in it. No property tax, no income tax, etc. What about income tax? What about corporate tax (personally, I think it makes sense, because it's a choice - you don't need to pay corporate tax, but they you don't get the privileges of the corporation being a separate entity)?
- yummyfajitas 11y ago
  For the most part, rich people produce far more than they consume. Poor people consume far more than they produce. Consumption inequality is vastly lower than income inequality. I'm opposed to income tax as well. A consumption tax is the best tax, since it's both a) hard to dodge, b) transparent and c) doesn't penalize investment. In principle an income tax is equivalent to a consumption tax, but in practice taxing labor income but not capital income induces all sorts of tax avoidance schemes that treat labor income as if it were capital income.
  - tomp 11y ago
    Do you value "equality" at all? E.g. do you find huge inheritance unfair (because it's something you didn't produce) or not? How about "proportionate representation" (one person, one vote, as opposed to the current situation where rich have vastly more political power)?
    - yummyfajitas 11y ago
      I don't particularly value equality - rather, I value utility. If I can make everyone better off, but increase inequality in the process, I will. How much poverty are you willing to create to reduce inequality? That's the fundamental question. For me the answer is zero. I also don't assign much value to proportionate representation. I think I'd prefer the rich to have more political power, they seem to be the least insane. Unfortunately, in our system we do have proportionate representation. The only way a rich person can influence electoral outcomes is by persuading poor and middle class people to vote for his candidate. Sadly, as Trump demonstrates, this can be done just as easily with nonsensical emotional appeals as with intellectual ones.
      - dragonwriter 11y ago
        > I don't particularly value equality - rather, I value utility. If I can make everyone better off, but increase inequality in the process, I will. Unfortunately, inequality is, empirically, one of the strongest sources of disutility. So, as much as you might think you can "make everyone better off, but increase inequality in the process" when you use poor proxies for utility, you probably can't. > I also don't assign much value to proportionate representation. Comparative studies (at least among nominal democracies), show that proportionality is fairly strongly correlated with experienced utility of government. So, this may be incompatible with your claimed preference for utility. (see, e.g., Lijphart's Patterns of Democracy.) > I think I'd prefer the rich to have more political power, they seem to be the least insane. Maybe they just have more power to shape perceptions through media, image management, etc.
adamlett 11y ago
Taxation based on consumption is a horrible idea, because it impacts the people with low incomes much more than the people with high incomes. Everyone must spend a fraction of their income on consumption merely to exist. The poorer you are, the larger that fraction. Which means that a tax based on consumption is in effect a form of progressive taxation turned upside down where you pay less the more you earn.
- DanBC 11y ago
  You don't have to tax food, or children's clothing, or books or etc.
  - adamlett 11y ago
    What then would you tax? Yachts and jewelry? At what rate? Do you think you could run any society on what could be collected on taxes on non-essential consumption?
- yummyfajitas 11y ago
  Yes, it taxes people proportional to the benefit they receive rather than proportional to the value they create. Low/no income people tend to consume far more than they produce. Such a tax will stop penalizing investment which is a good thing. Why would we want rich people to throw lavish parties rather than creating future productive capacity?
  - adamlett 11y ago
    First of all, yes, consumption is almost always preferable to "letting your money work for you". Contrary to what you seem to think, most people who have more wealth than they need for consumption, don't use that wealth to fund new ventures. Instead they mostly just own assets that appreciate in value and/or pay a dividend. They do not create new wealth to any significant degree. While it is true to some extent that having money in the bank can help create new wealth, it makes no difference if it's one person putting a million dollars or a thousand people each putting one thousand dollars in the bank. The result in either case is that the bank can lend out a million dollars to someone starting a new venture. I mention this because when one person spends (consumes goods) a thousand dollars say, that money goes out if her bank account and into someone else's. The bank's ability to lend out money is unaffected. Meanwhile, thanks to the power of capitalism, money that is spent flows towards what society in aggregate deems most valuable, ensuring that more effort is spent on creating more of that valuable thing. This is in a nutshell why it's preferable for all, poor and rich, to prevent rampant inequality. Secondly, I do somewhat agree that we shouldn't disincentivize investment or saving up. I am not familiar with the US tax system, but in some countries you can defer paying taxes on what you put into a pension plan until the time when you collect your pension. If the interest you earn on your savings is more than the inflation, this is a win/win situation: You will earn interest on a larger amount, and society will collect tax on a larger amount in the end too. I could probably be convinced that it would be a good idea to make all investment and savings tax free provided that all dividends as well as any amount liquidated was taxed as income. Buy a house? Fine that's tax deductible. Sell a house? Get taxed on the entire amount as if it were income.
Lawtonfogle 11y ago
>But that's a political non-starter; our western systems of taxation are built around the lie that the rich benefit disproportionately from our society. Those who have more benefit more from a state of order. Be this material possession like money or natural qualities like beauty.

curun1r 11y ago

> This implies that things like dividends should not be taxed, since no commerce occurs. All that happened is a piece of property split into two. Would you favor this outcome? If not, why not? I'm fine with that, so long as the corporate tax side of the equation balances...companies use dividends to reduce their income and the taxes they pay. If a dividend is just splitting an asset in two, it shouldn't be deductible.

yummyfajitas 11y ago
Dividends are paid with after-tax income. You might be confusing them with distributions paid by pass-through entities (where corporate income is treated as personal income by the owners).

tomp 11y ago

> the lie that the rich benefit disproportionately from our society Why do you consider that a lie? There's a reason why kidnappers try to target rich people's kids... because rich people are willing to pay much more to gave their kid back - they literally value the kid's life more (in money terms). Another perspective is, a geting injured/killed will deprive a rich person of a lot of consumption, but a poor person of just a little consumption. Therefore, by protecting rich people, governments provide more value than by protecting poor people. > Now personally, I'm in favor of eliminating all taxes on capital income (and capital, e.g. property taxes). Economically, the best tax is a consumption tax; you live in a home, you pay taxes on the value of living in it. No property tax, no income tax, etc. What about income tax? What about corporate tax (personally, I think it makes sense, because it's a choice - you don't need to pay corporate tax, but they you don't get the privileges of the corporation being a separate entity)?

yummyfajitas 11y ago
For the most part, rich people produce far more than they consume. Poor people consume far more than they produce. Consumption inequality is vastly lower than income inequality. I'm opposed to income tax as well. A consumption tax is the best tax, since it's both a) hard to dodge, b) transparent and c) doesn't penalize investment. In principle an income tax is equivalent to a consumption tax, but in practice taxing labor income but not capital income induces all sorts of tax avoidance schemes that treat labor income as if it were capital income.
- tomp 11y ago
  Do you value "equality" at all? E.g. do you find huge inheritance unfair (because it's something you didn't produce) or not? How about "proportionate representation" (one person, one vote, as opposed to the current situation where rich have vastly more political power)?
  - yummyfajitas 11y ago
    I don't particularly value equality - rather, I value utility. If I can make everyone better off, but increase inequality in the process, I will. How much poverty are you willing to create to reduce inequality? That's the fundamental question. For me the answer is zero. I also don't assign much value to proportionate representation. I think I'd prefer the rich to have more political power, they seem to be the least insane. Unfortunately, in our system we do have proportionate representation. The only way a rich person can influence electoral outcomes is by persuading poor and middle class people to vote for his candidate. Sadly, as Trump demonstrates, this can be done just as easily with nonsensical emotional appeals as with intellectual ones.
    - dragonwriter 11y ago
      > I don't particularly value equality - rather, I value utility. If I can make everyone better off, but increase inequality in the process, I will. Unfortunately, inequality is, empirically, one of the strongest sources of disutility. So, as much as you might think you can "make everyone better off, but increase inequality in the process" when you use poor proxies for utility, you probably can't. > I also don't assign much value to proportionate representation. Comparative studies (at least among nominal democracies), show that proportionality is fairly strongly correlated with experienced utility of government. So, this may be incompatible with your claimed preference for utility. (see, e.g., Lijphart's Patterns of Democracy.) > I think I'd prefer the rich to have more political power, they seem to be the least insane. Maybe they just have more power to shape perceptions through media, image management, etc.

adamlett 11y ago

Taxation based on consumption is a horrible idea, because it impacts the people with low incomes much more than the people with high incomes. Everyone must spend a fraction of their income on consumption merely to exist. The poorer you are, the larger that fraction. Which means that a tax based on consumption is in effect a form of progressive taxation turned upside down where you pay less the more you earn.

DanBC 11y ago
You don't have to tax food, or children's clothing, or books or etc.
- adamlett 11y ago
  What then would you tax? Yachts and jewelry? At what rate? Do you think you could run any society on what could be collected on taxes on non-essential consumption?
yummyfajitas 11y ago
Yes, it taxes people proportional to the benefit they receive rather than proportional to the value they create. Low/no income people tend to consume far more than they produce. Such a tax will stop penalizing investment which is a good thing. Why would we want rich people to throw lavish parties rather than creating future productive capacity?
- adamlett 11y ago
  First of all, yes, consumption is almost always preferable to "letting your money work for you". Contrary to what you seem to think, most people who have more wealth than they need for consumption, don't use that wealth to fund new ventures. Instead they mostly just own assets that appreciate in value and/or pay a dividend. They do not create new wealth to any significant degree. While it is true to some extent that having money in the bank can help create new wealth, it makes no difference if it's one person putting a million dollars or a thousand people each putting one thousand dollars in the bank. The result in either case is that the bank can lend out a million dollars to someone starting a new venture. I mention this because when one person spends (consumes goods) a thousand dollars say, that money goes out if her bank account and into someone else's. The bank's ability to lend out money is unaffected. Meanwhile, thanks to the power of capitalism, money that is spent flows towards what society in aggregate deems most valuable, ensuring that more effort is spent on creating more of that valuable thing. This is in a nutshell why it's preferable for all, poor and rich, to prevent rampant inequality. Secondly, I do somewhat agree that we shouldn't disincentivize investment or saving up. I am not familiar with the US tax system, but in some countries you can defer paying taxes on what you put into a pension plan until the time when you collect your pension. If the interest you earn on your savings is more than the inflation, this is a win/win situation: You will earn interest on a larger amount, and society will collect tax on a larger amount in the end too. I could probably be convinced that it would be a good idea to make all investment and savings tax free provided that all dividends as well as any amount liquidated was taxed as income. Buy a house? Fine that's tax deductible. Sell a house? Get taxed on the entire amount as if it were income.

Lawtonfogle 11y ago

>But that's a political non-starter; our western systems of taxation are built around the lie that the rich benefit disproportionately from our society. Those who have more benefit more from a state of order. Be this material possession like money or natural qualities like beauty.