3 ms·

Shifting taxes to sales, especially in a significant way, will just dampen aggregate demand, and push us into a deeper and longer recession. (See a comment I ma

by rwl 16y ago

Shifting taxes to sales, especially in a significant way, will just dampen aggregate demand, and push us into a deeper and longer recession. (See a comment I made here, on an article that didn't get any front-page time about states looking to raise revenue by taxing online sales: http://news.ycombinator.com/item?id=1513784 http://news.ycombinator.com/item?id=1513784) An alternative solution is to tax the unused value of illiquid capital like land. Unlike income and sales taxes, which act as disincentives on economic exchange, this kind of tax acts as an incentive for exchange, production, and employment: if you own capital which is not being put to use, this tax is either an incentive to put it to use or to sell it to someone who will. This isn't a new idea. It was put forward by Henry George in Progress and Poverty in 1879: http://en.wikipedia.org/wiki/Progress_and_Poverty http://en.wikipedia.org/wiki/Progress_and_Poverty (Disclaimer: I haven't read the book, but I did buy it recently and it's on my to-read list.)

Retric 16y ago
This is actually the economic argument for low levels of inflation.
- rwl 16y ago
  Can you elaborate, please?
  - Retric 16y ago
    It forces people to be more aggressive with their investments if they want to maintain wealth. If your making 15% ROI each year 2% inflation is nothing, if you make 2.5% ROI each year inflation is going to crush you. Now which one of those people has demonstrated a better utilization of capital? Consider property taxes: if your ranch makes 100k / year many people will haply keep doing that for sentimental reasons, if however the land is worth 50 million and you need to pay 100k in taxes each year you will sell it to someone who will use the resource more productively. It also eats away at debt. So if say the housing market is under water inflation is going to help people get out from their debt load. PS: Or consider what happens with 20% deflation, what would you invest in?
    - rwl 16y ago
      Ah, I see: the argument is that we ought to try to maintain a little inflation, but not too much, because it acts as an incentive for better capital utilization. Perhaps I'm being thick, but I'm still unsure: when you say, "Actually, this is the argument for low inflation," do you mean that we should focus on maintaining a low level of inflation instead of taxing underutilized capital? or in addition to it? or that, in policy terms, they're two sides of the same coin?
    - eru 16y ago
      > It forces people to be more aggressive with their investments if they want to maintain wealth. If your making 15% ROI each year 2% inflation is nothing, if you make 2.5% ROI each year inflation is going to crush you. Now which one of those people has demonstrated a better utilization of capital? Please be careful to talk make clear whether you are talking about nominal ROI or inflation-adjusted (i.e. real) ROI. If you have a tame investement with x% real ROI, you will get approximately x%+inflation nominal ROI. So your argument needs patching up. It is true, that inflation deters one from just holding onto cash.
- deleted 16y ago
  [deleted]
doki_pen 16y ago
But how does that avoid rewarding companies for moving overseas? It basically gives a huge competitive advantage to foreign companies. You have to tax the use of our market if you want to be fair. How else can we do it with a fair law that isn't protectionism? Also, is there data to back up sales taxes in relation to dampening demand? It's the same tax, just taken from a different place. I find it hard to believe that the common consumer would hold on to money. They just don't do that.
eru 16y ago
An interesting continuation to this idea is the German Freiwirtschaft movement (http://en.wikipedia.org/wiki/Freiwirtschaft http://en.wikipedia.org/wiki/Freiwirtschaft). Or see http://www.finanzcrash.com/english/aberrations.html http://www.finanzcrash.com/english/aberrations.html for an introduction.

by rwl 16y ago

Retric 16y ago

This is actually the economic argument for low levels of inflation.

rwl 16y ago
Can you elaborate, please?
- Retric 16y ago
  It forces people to be more aggressive with their investments if they want to maintain wealth. If your making 15% ROI each year 2% inflation is nothing, if you make 2.5% ROI each year inflation is going to crush you. Now which one of those people has demonstrated a better utilization of capital? Consider property taxes: if your ranch makes 100k / year many people will haply keep doing that for sentimental reasons, if however the land is worth 50 million and you need to pay 100k in taxes each year you will sell it to someone who will use the resource more productively. It also eats away at debt. So if say the housing market is under water inflation is going to help people get out from their debt load. PS: Or consider what happens with 20% deflation, what would you invest in?
  - rwl 16y ago
    Ah, I see: the argument is that we ought to try to maintain a little inflation, but not too much, because it acts as an incentive for better capital utilization. Perhaps I'm being thick, but I'm still unsure: when you say, "Actually, this is the argument for low inflation," do you mean that we should focus on maintaining a low level of inflation instead of taxing underutilized capital? or in addition to it? or that, in policy terms, they're two sides of the same coin?
  - eru 16y ago
    > It forces people to be more aggressive with their investments if they want to maintain wealth. If your making 15% ROI each year 2% inflation is nothing, if you make 2.5% ROI each year inflation is going to crush you. Now which one of those people has demonstrated a better utilization of capital? Please be careful to talk make clear whether you are talking about nominal ROI or inflation-adjusted (i.e. real) ROI. If you have a tame investement with x% real ROI, you will get approximately x%+inflation nominal ROI. So your argument needs patching up. It is true, that inflation deters one from just holding onto cash.
deleted 16y ago
[deleted]

doki_pen 16y ago

But how does that avoid rewarding companies for moving overseas? It basically gives a huge competitive advantage to foreign companies. You have to tax the use of our market if you want to be fair. How else can we do it with a fair law that isn't protectionism? Also, is there data to back up sales taxes in relation to dampening demand? It's the same tax, just taken from a different place. I find it hard to believe that the common consumer would hold on to money. They just don't do that.

eru 16y ago

An interesting continuation to this idea is the German Freiwirtschaft movement (http://en.wikipedia.org/wiki/Freiwirtschaft http://en.wikipedia.org/wiki/Freiwirtschaft). Or see http://www.finanzcrash.com/english/aberrations.html http://www.finanzcrash.com/english/aberrations.html for an introduction.