4 ms·

Would a consumption/luxury tax be fairer than a wealth tax? I'd imagine with a wealth tax it would be more difficult for folks to retire?

leot 13y ago
If there are specific policy goals that we'd like to accomplish, it's probably best to make a very simple taxation system (tax the total of everything, using the best appraisal tools we have), and then add specific provisions that address such goals directly. One simple approach to the retirement issue might be to have marginal wealth taxation rates (first $100k are exempt, e.g.), or have (as we do now) limited tax-protected retirement funds (EDIT: e.g., IRAs -- "accounts" might have been the better word).
- dnautics 13y ago
  that's cute, who would get the privilege to run those tax-protected retirement funds. What sort of investments would be permitted in these funds? Aren't these people, then, the benefits of largesse created as people flee the taxation?
  - michaelt 13y ago
    Plenty of countries already have partly-tax-exempt retirement savings, to encourage people to lock money up for retirement instead of making equivalent instant access investments.
    - jeltz 13y ago
      Yes, and there the banks running those tax exempt savings make a killing through their large profit margins.
  - leot 13y ago
    Huh? Instead of "fund" perhaps I should have said "account". I was just thinking of IRAs (as they're named in the U.S.) and the like.
    - dnautics 13y ago
      what are you allowed to put into an IRA, and those investment vehicles are the benefits of a privilege that no one else has. Could you use your IRA to invest in a person just released from prison, to give them job training, if he agrees to pay you a portion of his salary back? No. But you could use your IRA to invest in a fortune 500 company.
yummyfajitas 13y ago
Depends on your perspective. A consumption tax charges people in proportion to the benefit they receive from society. An income tax charges people in proportion to the value they create for society. A wealth tax charges people in proportion to how much they save for the future. So the question is what do we want to discourage? Consumption, value creation or savings?
- rlanday 13y ago
  Savings, right, since we want rich people to spend money instead of hoarding it to drive the economy? Or value creation, since it causes economic inequalities? Or maybe even consumption, I guess, if you hate America and don't believe the amount of money we can borrow and spend by racking up a trade deficit is a good measure of economic health.
- leot 13y ago
  You don't have to spend any money to benefit from being wealthy.
dnautics 13y ago
yup, also what would happen is the government would get bigger and bigger on these newfound taxation revenues. That's not great, but in the most idealistic situation, it's not necessarily bad. However, what is bad, is when the economy sags, the taxation revenues to sustain this bigger government will fall short, the government will go into debt, and do one of two things: It will either print money or borrow. Borrowing (with interest) implicitly assumes the growth of a revenue stream. With private entities, the lender is on the hook if it goes bankrupt and can't fulfill its obligation. With public entities, the citizen is on the hook, so the only solution is to increase taxation down the pike, unless you have a miraculous recovery that restores the economy to what it was before (plus interest). If you don't think the wealthy will find a way to avoid this taxation down the pike that the middle class and poor will have a harder time leveraging, you are naive. Printing money is worse. Because it devalues the currency, makes everything more expensive, and that $100,000 limit that you set as the point where the wealth tax kicks in becomes a lot more painful. Pretty soon, the poor are paying this tax that only the rich were supposed to pay. Over net time, the people that you are hurting the most are the poor, because the rich have long ago figured out how to avoid this tax. Congratulations. Through your programme of good intentions to fix the divide between the rich and poor you have made the situation far worse than it ever was.
- eli_gottlieb 13y ago
  Money is debt. There has never been a world without public debt, because that debt has to come from somewhere. Usually, it comes from the government, and the rates of interest and repayment dictate growth or shrinkage of the money supply.
  - dnautics 13y ago
    Contemporary money is certainly equivalent debt, but in the long run historically, debt has been private debt. Keeping in mind that for much of modern history, any form of lending was considered "usury" and generally relegated to corners of society. There is a difference between money that is based on savings and money that is based on debt. Money that is based on savings is net, an exchange for services that have already been rendered. Money that is net based on debt is net, an exchange for services that are expected to be rendered. One of these paradigms is subject to painful corrections as a result of counterparty risk; the other paradigm treats unexpected failures as a sunk cost.

leot 13y ago

If there are specific policy goals that we'd like to accomplish, it's probably best to make a very simple taxation system (tax the total of everything, using the best appraisal tools we have), and then add specific provisions that address such goals directly. One simple approach to the retirement issue might be to have marginal wealth taxation rates (first $100k are exempt, e.g.), or have (as we do now) limited tax-protected retirement funds (EDIT: e.g., IRAs -- "accounts" might have been the better word).

dnautics 13y ago
that's cute, who would get the privilege to run those tax-protected retirement funds. What sort of investments would be permitted in these funds? Aren't these people, then, the benefits of largesse created as people flee the taxation?
- michaelt 13y ago
  Plenty of countries already have partly-tax-exempt retirement savings, to encourage people to lock money up for retirement instead of making equivalent instant access investments.
  - jeltz 13y ago
    Yes, and there the banks running those tax exempt savings make a killing through their large profit margins.
- leot 13y ago
  Huh? Instead of "fund" perhaps I should have said "account". I was just thinking of IRAs (as they're named in the U.S.) and the like.
  - dnautics 13y ago
    what are you allowed to put into an IRA, and those investment vehicles are the benefits of a privilege that no one else has. Could you use your IRA to invest in a person just released from prison, to give them job training, if he agrees to pay you a portion of his salary back? No. But you could use your IRA to invest in a fortune 500 company.

yummyfajitas 13y ago

Depends on your perspective. A consumption tax charges people in proportion to the benefit they receive from society. An income tax charges people in proportion to the value they create for society. A wealth tax charges people in proportion to how much they save for the future. So the question is what do we want to discourage? Consumption, value creation or savings?

rlanday 13y ago
Savings, right, since we want rich people to spend money instead of hoarding it to drive the economy? Or value creation, since it causes economic inequalities? Or maybe even consumption, I guess, if you hate America and don't believe the amount of money we can borrow and spend by racking up a trade deficit is a good measure of economic health.
leot 13y ago
You don't have to spend any money to benefit from being wealthy.

dnautics 13y ago

yup, also what would happen is the government would get bigger and bigger on these newfound taxation revenues. That's not great, but in the most idealistic situation, it's not necessarily bad. However, what is bad, is when the economy sags, the taxation revenues to sustain this bigger government will fall short, the government will go into debt, and do one of two things: It will either print money or borrow. Borrowing (with interest) implicitly assumes the growth of a revenue stream. With private entities, the lender is on the hook if it goes bankrupt and can't fulfill its obligation. With public entities, the citizen is on the hook, so the only solution is to increase taxation down the pike, unless you have a miraculous recovery that restores the economy to what it was before (plus interest). If you don't think the wealthy will find a way to avoid this taxation down the pike that the middle class and poor will have a harder time leveraging, you are naive. Printing money is worse. Because it devalues the currency, makes everything more expensive, and that $100,000 limit that you set as the point where the wealth tax kicks in becomes a lot more painful. Pretty soon, the poor are paying this tax that only the rich were supposed to pay. Over net time, the people that you are hurting the most are the poor, because the rich have long ago figured out how to avoid this tax. Congratulations. Through your programme of good intentions to fix the divide between the rich and poor you have made the situation far worse than it ever was.

eli_gottlieb 13y ago
Money is debt. There has never been a world without public debt, because that debt has to come from somewhere. Usually, it comes from the government, and the rates of interest and repayment dictate growth or shrinkage of the money supply.
- dnautics 13y ago
  Contemporary money is certainly equivalent debt, but in the long run historically, debt has been private debt. Keeping in mind that for much of modern history, any form of lending was considered "usury" and generally relegated to corners of society. There is a difference between money that is based on savings and money that is based on debt. Money that is based on savings is net, an exchange for services that have already been rendered. Money that is net based on debt is net, an exchange for services that are expected to be rendered. One of these paradigms is subject to painful corrections as a result of counterparty risk; the other paradigm treats unexpected failures as a sunk cost.