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Ok, why do we tax income and capital gains (which have few externalities) vastly more than consumption (which has a lot of externalities)?
by chmod600 3y ago
Ok, why do we tax income and capital gains (which have few externalities) vastly more than consumption (which has a lot of externalities)?
- rmah 3y agoTaxing consumption discourages consumption which thus acts as a drag on the overall economy. Further, most people view it as "unfair" because a fixed consumption tax (sales, GST, VAT) results in lower income people paying a higher percentage of their income as tax. Progressive income taxation 1) does not discourage consumption as much as a higher consumption tax for those with lower income (which is most people), 2) encourages investment for companies and individuals with higher incomes.