Quote:
Originally Posted by markbot
theoretically, economists say the best tax would be fixed and levied at the beginning of your life...assuming they knew your earnings power. consumption based taxes are actually among the worse types of taxes because they distort buying and selling decisions the most....creating a wedge between buyers and sellers.
fixed taxes are less distortive (think property taxes)
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Ahh, but that's just it, taxes aren't used solely for raising income any more. Today our government is already taxing us (and providing "rebates") to "distort" buying decisions. We have (or will soon have) punative taxation on things the government wants us to stop doing, or at least do less of, like:
Purchasing cigarrettes/alcohol
Carbon emissions
"Fatty" foods
Just to name a few that come freely to mind.
As it stands now, our income is taxed, which does provide pressure against gaining more income. Several times in my life I've received increases in pay only to find out I've hit the next tax bracket, so being at the bottom of the next tax bracket caused me to net LESS money after taxes.
If you tax consumption, it provides pressure to not consume as much, yes, so that money would be saved, and at our current economic situation had we americans had even as little as a 10% savings rate, we would have avoided this whole situation.
One of the lessons we should learn is that "out of control" consumption isn't a LONG TERM good thing for an economy, EVENTUALLY the "bill" comes due.
So let's stop taxing income, earning income is good, let's start taxing consumption, spending ALL of your earnings isn't as good as spending some and saving some.
I don't see people saying, "Gee, I'd like to buy that 1000.00 wide screen LCD, but I don't want to have to pay an extra 200.00 for taxes, so I'll continue to watch TV on my old crappy screen."
That's just not how we roll in America, we'll buy it, regardless of the taxes if we think it's cool, and if it's a neccessity (as I mentioned in my previous post), it won't be taxes anyway, so no "harm" comes to the buyer-seller relationship on those items.