I think this kind of progressive consumption tax would be amazing for society. In a capitalist society, the theory goes that the individuals who are better at

I think this kind of progressive consumption tax would be amazing for society. In a capitalist society, the theory goes that the individuals who are better at allocating capital will accumulate more capital, allocate it better, thus accumulating more, etc. in a loop. I could be convinced that some people are much, much better at allocating capital than most. It makes sense to let them be our societal capital allocators. Obviously, we want limits so that if 1 person makes a serious misjudgment, it doesn’t completely tank society. But I could see it being the case where, if we were purely optimizing for sum-total societal capital accumulation, it would be optimal 1% of the population to be in charge of 90% of the capital. There are a few obvious problems with this scheme where it meets reality, though. The most over-arching is that our current system allows the controllers of capital to more or less arbitrarily convert between capital and consumption. That is, some billionaire can burn some of their capital and buy a $500MM mega-yacht. At the end of the day, this is essentially wasting the labor of 10,000 people for a year (at 50k average salary). Even if we accept the premise that Jeff Bezos is a better capital allocator than 99.99% of people, I think we could argue that his having a $500MM mega yacht is not going to increase his capital allocation ability. This is where the progressive consumption tax comes in. Imagine a tax that was quadratic with consumption. For example, you’d pay $1K in tax on $10K of consumption, $100K of tax on $100K of consumption, and $10MM in tax on $1MM in consumption (obviously these are example numbers, any upwardly curved function will do, though). It very quickly becomes prohibitively expensive to consume much more than some societal average. This would significantly decrease consumption inequality. There are a lot of second-order things affected by this tax: - becomes much harder for 1 billionaire to burn capital in order to consume marketing and influence elections - one could use some proceeds of this tax as simple transfer payments, so not only is it quadratically more expensive to consume more, but the revenue from doing so gets send to people lower on the consumption distribution. This enhances the consumption flattening effect. - reduces conspicuous consumption which is good for climate change - improves labor productivity by increasing the societal savings rate (driving investment and increasing capital allocation per unit of labor), which further enhances this whole flywheel - more things that are too long for this comment There are obvious implementation problems though. On the face of it, it seems more difficult for me to hide consumption than it is to hide wealth, but I’m sure there are schemes to do so. The basic form of this tax would be to demonstrate to the tax agency some accounting of your wealth (savings, investments, etc) at two points in time, and then your consumption is computed based on the net inflows and outflows.