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There are many good arguments for selectively taxing consumption (or rents, as in Georgism). What these miss is that the economy will route around them. Any lar
by beefman 6y ago
There are many good arguments for selectively taxing consumption (or rents, as in Georgism). What these miss is that the economy will route around them. Any large, diversified economy like that of the United States must tax all money flows to one degree or another. The complexity of the tax code around the few exceptions (e.g. retirement accounts) is a clue to that.
Small economies that don't issue reserve currencies can experiement more. They can even drop major forms of taxation and fund themselves on the resulting financial tourism. Like States that run on gambling revenues, this only works when they are in the minority.
This isn't to say that meaningful tax reforms are impossible. But they have to address this dynamic.
- pc86 6y agoIt sounds like you're saying that a more diversified economy will, by definition, need a more complex tax code. This is an interesting idea I don't think I've come across before. The one exception I can see to this is an extremely simple tax code e.g. a flat tax, which has a host of its own issues, including de facto regressive taxation.
- klipt 6y agoComplex tax codes are due to politics. For example tax breaks for specific groups are a way of rewarding voter support blocs. https://youtu.be/rStL7niR7gs https://youtu.be/rStL7niR7gs
- beefman 6y agoI'm saying complexity will increase around untaxed or tax-privildeged flows, as in the large and growing legislative, regulatory and accounting activities around retirement accounts. Look up "back door Roth" for one example. In our case, computing our contribution limits (which change at least annually) is also nearly impossible. Just giving a break to long-term capital gains is enormously complicated. Check out "substantially identical securities" for an example. Or try handling wash sale adjustments if you trade the same securities at more than one brokerage. If you don't priviledge any flows, or let the economy route everything through the priviledged flows, it can be very simple.