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If you read the Scott Sumner link I provided above, you'll realize why a consumption tax is actually the tax which doesn't favor one over the other. The main r
by yummyfajitas 11y ago
If you read the Scott Sumner link I provided above, you'll realize why a consumption tax is actually the tax which doesn't favor one over the other.
The main reason is that investment is merely delayed consumption (as you note above), so the consumption tax hits everyone equally regardless of whether they consume or invest. However, a capital income tax is additional taxation that applies only to the person who invests.
- lmm 11y agoI've had a second read and I think I see the contradiction. The article says it would be fine to tax GDP (and ultimately taxing all production should be equivalent to taxing all consumption). If I have x dollars of income, I can buy x dollars of beer, or I can buy a factory that will produce x NPV dollars of beer in the future. But the GDP in those cases would be different, wouldn't it? So in a tax-all-GDP regime I should be taxed on the x dollars of income now and, in the investment case, also on my investment income (or equivalently on my owned asset).