The Motley Fool Discussion Boards

Previous Page

Stocks B / Berkshire Hathaway


Subject:  Re: U.S. economy and markets Date:  10/7/2012  9:28 PM
Author:  mungofitch Number:  194722 of 218940

It would also be extremely regressive...

I don't buy the word "regressive" in tax discussions, too agenda-loaded ; )
Taking here the notion that consumption is a good first proxy for wealth,
regressive and progressive taxation schemes are more neutrally described
as taxation proportional to wealth versus geometrically varying as wealth.
"Proportional to wealth" sure sounds a lot less loaded than "regressive".
(nice analogy to the history of the word "bolshevik", meaning majority,
the name chosen for itself by the minority party of the time)

In any case, it's no biggie, since there are lots of things in the income
tax system which make tax a nonlinear function of income, and those parameters
could be tweaked to keep the non-linearity of taxation if that's what one wants.
The advantage of sales tax (usually combined with a credit for low
income households—a linear function need not pass through the origin)
is that it is a tax which is extremely efficient. It doesn't discourage investment,
employment, or savings, and doesn't cost that much to collect in an advanced economy.
It collects the most money for a low cost and minimal economic distortions,
depending only on the power of the lobby groups who try to get exemptions.
Economic distortions explode rapidly, so it's generally best to have
a hard line with no exemptions beyond unprepared food.

and dampen demand in the middle of a recession/depression so it may be a really disastrous idea...
I agree that's a big concern; the UK is a prime example of attempting
to lose weight by decapitation. But there's nothing to say when it has to kick in.
Also, as mentioned it's an extraordinarily efficient way to raise tax,
dampening economic a