The Flat Tax thread

[I.J. Reilly]

Taxes should only be used for reason #1

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If that's the only reason for taxes, why the prebates and other wealth transfers in the fair tax that you advocate?

[Mormon Red Death]

Re: The Flat Tax thread

Differentiate that from the current estate tax.

100% different that whatever the tax is now.

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[Mormon Red Death]

Re: The Flat Tax thread

If that's the only reason for taxes, why the prebates and other wealth transfers in the fair tax that you advocate?

To make it politically feasible

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[I.J. Reilly]

100% different that whatever the tax is now.

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Thanks. That helps.

[Mormon Red Death]

Re: The Flat Tax thread

Thanks. That helps.

100% suggests that the money was never person A's to begin with. This is saying none of the money we make is ours. There is no private property in this scenario.

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[I.J. Reilly]

The prebate would be monthly in the fair tax plan.

Your estate tax plan is horrible. You are suggesting that person A money is not really theirs but . The government's.

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I should also reply that my plan does not suggest what you say it does. It suggests that Person A's money is 100% theirs. Person B is not permanently entitled to money they did not earn. That Person A is potentially not permanently able to guide what happens to all of their money post-death is not a new idea in estate law, btw.

[Mormon Red Death]

Re: The Flat Tax thread

I should also reply that my plan does not suggest what you say it does. It suggests that Person A's money is 100% theirs. Person B is not permanently entitled to money they did not earn. That Person A is potentially not permanently able to guide what happens to all of their money post-death is not a new idea in estate law, btw.

You aren't entitled to any money or property given to you?

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[All-American]

Just so you know, there are many economic heavyweights out there (e.g., Raghuram Rajan, Simon Johnson, inter alia) who identify a global savings glut, particularly a dollar-denominated savings glut, as a prime contributor to our recent unpleasantries. I mention this only so that you know I'm not just flying off the cuff with speculation about what savings might do to an economy.

To be clear, when I'm talking about savings, I'm not just talking about the money in a piggy bank or the dollars in a savings account. It incorporates all investments and other assets in excess of consumer spending.

Just so I can stay on track here, there are a few major purposes I see to taxes:
1. Generating revenue to pay for the things we have collectively decided we want from our government.
2. Incentivizing or de-incentivizing behaviors.
3. Preventing the formation of permanent under- and over-classes from forming.
4. There are probably other reasons that given a little more time and thought I might be able to articulate.

Now, I personally believe that a pure consumption tax injures #2 and runs roughshod over #3, both for the reasons stated, and probably others that I haven't articulated.

By adding a tax on savings (in the way I have defined them), you might partially ameliorate my concerns with #3, but it may be too much of a rough tool considering the disincentives that it would then create. As you continue to tweak and refine, you eventually end up with a tax code that probably looks a lot like the one we have now.

I hope I'm making sense.

Sure, and I've read up on some of them, too. And I'm sure you'll agree that there was a lot more going on than people with more money than they knew what to do with.

I do get that you mean more than piggy banks and savings accounts. I'll grant you, arguendo, that the three purposes of taxation which you raise are legitimate exercises of taxing power (though the third might stand a little more scrutiny), and I'm inclined to believe that with just a little ingenuity, a flat consumption tax system would better serve them. Taxing on the purchase end rather than the income end seems more apt, not less, to target specific behaviors, especially where the behaviors involve any kind of economic transaction. A "savings" tax would not likely have more perverse incentive effects than our current capital gains structure has, and if deferred taxation is the reason that a consumption tax ends up being regressive, then it gives you a way to address it. Even a "rough" tool could well be an improvement over the current system.