Starting with the McDonalds example given by someone else. Should Bill Gates pay more for his burger? The question you should be asking is should the guy who wants Ketchup on his fries pay more than the guy who doesn’t? Perhaps you might want to ask how much does it cost for health inspectors to examine restaurants? Who funds these inspectors? Should people who eat out more frequently than others fund a higher percentage than others? How is this cost going to be captured and appropriated?
If people eat out more frequently, they pay each time for their use of the facilities.
Back to Bill. Is it fair to say that he likely travels by air much more frequently than most? Does he therefore use publicly funded airports and terminals much more than others? Does he use these facilities much more frequently than the poor, who perhaps never fly anywhere? Can we establish a user fee for access to an airport? Do we really know whether or not the airport fees paid by a carrier accurately reflect usage rates by specific persons? Is this cost therefore truly recoverable from Bill? Since 100’s of millions of public money was spent on building the airport, is there not also a lost opportunity cost for those who don’t use the airport? Could not the money have been spent on something else of more value to them?
He pays for use of the airport. So, he’s helping the economy by using the airport a lot. There are a lot of jobs at the airport.
Does Bill live in a large house in a suburb? Are the infrastructure costs for mainline plumbing, electricity, access roads etc much higher there than in a densly populated urban area? Does the increase in property taxes that Bill pays adequately cover the differential? Is their not another lost opportunity cost for those who don’t live in the suburbs? Can they not make a claim that any public funds expended would be better off spent on infrastructure in an urban area? Enough of Bill for the moment. You get the idea that connecting usage and fair share is quite complex.
Big house = more property tax.
So, we decide to eliminate certain programs and certain taxes. What is the true net effect on the economy? Cystic Crypt made an excellent point on how the rich use their money. Much of it is invested outside of the country. How does that help the countries economy? More is invested in high value, high margin toys. How much of that really trickles down? Is $1M spent on a yacht at a 50% margin the same as $1M spent on food at the local grocery store at a 10% margin? All of the evidence published in economic circles would suggest not. It would appear that very little of the windfall of the rich in a tax reduction change actually makes it way into the base economic drivers of a country.
As I said earlier, this plan would be implemented with the Nuclear Power thread. The Nuclear Power Thread is designed to boost the economy while saving the Government cash.
What about the poor? Let’s assume for a moment that the solution would tradeoff Social Security for increased present day cashflow. What do we want them to do? Do we want them to save it for retirement? Perhaps we want to be like the Japanese and have a huge proportion of savings, but a stagnant economy? What would be the net effect on actual money supply and consequently, infaltion? Assume we can make the solution work in combination with tax cuts, so the net effect on the poor is zero and on the supply of money is zero, so inflation does not rise. Instead of investing in SS with a potential 2% return, we can now save however we wish, with potential higher returns. Of course, money and wealth are not actually created in a stock market, just redistributed. For every buyer, there is a seller. Now what % of the poor are educated enough to participate in this market on their own, with at least a reasonable chance of success? I would suggest few. Indeed, I would suggest that informed buyers generally have the advantage over the uninformed. Indeed, even a capital loss is of some value to a rich man, whereas for the poor, a loss is a loss. So perhaps the poor can buy the services of others to aid them. Have you not just redistributed a portion of the poor’s wealth to someone above them?
Perhaps we actually want the poor to use their increased disposable income to consume now, have a better life now. Perhaps we believe that this consumption will actually be good for the economy in the short term. But what happens in the longer term? What happens when the poor consume their disposable income in the short term, perhaps aiding the economy, but then the economy tanks because of global forces well beyond the poor’s ability to influence? We would seem to have traded off short term increased consumption for decreased long term security. What are the long term ramifications of doing so? Perhaps the answer lies not in eliminating SS, but in restructuring it, so that a higher return is offered. Maybe SS should buy gov’t bonds, but then again, this would increase the money supply and create infationary pressures.
Education is the key. Bonds are probably the smartest thing, but let the people handle their money. And we don’t get a 2% return on our money. We get a negative return.
I am not suggesting that I have all the answers to these questions. I am suggesting that the questions are actually extremely complex and the solutions proposed above are far too superficial and rely upon a set of assumptions which history has demonstrated as at least partially false. One of the base fundamental problems with an income tax system, as opposed to a consumption tax system is that the link between usage of service/product and actual cost is very unclear. On the other hand, without income tax, a 100% consumption tax system would be extremely vulnerable in recession & stagnation.
England has a strange tax system. No income tax, in fact very few taxes. However, there is a steep 17% sales tax.
