Is it feasible to switch from an income-based tax system to a wealth-based tax system

[DuncanK]

Originally posted by Goingonit


You have just confused currency (in this case, specie) for wealth. WEALTH IS THE SUM OF THE VALUES OF ALL GOODS OWNED. mining gold (or printing currency) neither increases or decreases wealth. The nations were striving after currency, which is bad. BUT CURRENCY IS NOT WEALTH.

Currency is a store of value just like land or stocks. It can be traded later for something else of value. People hold currency just like the do land or stocks, for speculation. Actually currency has many uses. Oh dear, I didn't mean to confuse you more by using currency as an example. Think of gold coins. People speculate with gold coins right.

Now you have patronized someone who actually does have a BA in economics (Imran), and misinterpreted one of the greatest economists ever. [/QUOTE]

If you think that I misinterpreted Adam Smith please demonstrate it instead of just saying it.

[Goingonit]

But the total value of all printed (or minted) currency is proportional to the to the total value of all of the rest of the nation's wealth. If you make more money, the value of the money already existing goes down; this is why Spain screwed itself over in the 16th century. Economically, production of goods and services is never a bad thing.

And if you give me a chapter reference, I'll explain how you're misinterpreting Adam Smith.

[Imran Siddiqui]

You see people used to believe just as you that the best thing to do is increase the amount of wealth (in this case gold) that people held. In his book, Adam Smith argues that only the production of goods and services (the income of a nation) is of any importance to that nation.

An increase in income leads to an increase in wealth (generally), for as Goingonit said, wealth is the sum in value of all goods owned. More income will naturally lead to greater wealth.

[Goingonit]

Wait, I found it. "Principle of the mercantile system", Bk. 4 Ch. 1.

"It would be too ridiculous to go about seriously to prove, that wealth does not consist in money, or in gold and silver; but in what money purchases, and is valuable only for purchasing. Money, no doubt, makes always a part of the national capital; but it has already been shown that it generally makes but a small part, and always the most unprofitable part of it."

[DuncanK]

Originally posted by Imran Siddiqui

You see people used to believe just as you that the best thing to do is increase the amount of wealth (in this case gold) that people held. In his book, Adam Smith argues that only the production of goods and services (the income of a nation) is of any importance to that nation.

An increase in income leads to an increase in wealth (generally), for as Goingonit said, wealth is the sum in value of all goods owned. More income will naturally lead to greater wealth.

Great! We agree.

The reverse is not true. Greater national wealth does not make greater national income.

[DuncanK]

Originally posted by Goingonit
Wait, I found it. "Principle of the mercantile system", Bk. 4 Ch. 1.

I'm agraid you should read the whole book Goingonit. The book is called "The Wealth of Nations." He is arguing as to what is the true wealth of a nation. He is arguing the the true measure of the wealth of a nation is its productive power, not the amount of gold that the nation has. More productive power is created by increases in productivity.

This is unfortunate, because Adam Smith is not helping us here as I had hoped.

You see, people kept gold as a store of value not just as a something to buy things with. I believe you have taken this quote out of context, but I will get the book and look this up. I think we can work from here.

[Goingonit]

Not directly. However, since all wealth depreciates, a situation in which wealth is disproportionate with income will not last long. If income does not match consumption, then the amount of wealth will decrease.

[DuncanK]

Originally posted by DuncanK


ok, right

Just to make sure things are clear. The investment component in GDP is the production of factories and things like that. Things like a law firm purchasing paper is accounted under consumption because value is added to it in the production of a final service. The price of the final service is counted, but not the paper in addition.

[DuncanK]

Originally posted by Goingonit
Not directly. However, since all wealth depreciates, a situation in which wealth is disproportionate with income will not last long. If income does not match consumption, then the amount of wealth will decrease.

The value of currency may increase as well as decrease. It's called deflation and is not so uncommon.

Wealth is generally increasing all the time. Income increases and decreases. They are not neccessarily proportional. Wealth is an accumulation of income that is not spent every year.

[Goingonit]

I've read the book. The point I was trying to make was that money is very different from wealth. Do you accept that? If so, we can move on. If not, explain why.

The point he makes in that passage is that storing gold doesn't result in any real increase of national purchasing power or wealth. I agree with that. I hope you agree with that.

And BTW, my last post refers to your post about an increase of wealth not leading to an increase in income.

[Goingonit]

Originally posted by DuncanK
The value of currency may increase as well as decrease. It's called deflation and is not so uncommon.

Wealth is generally increasing all the time. Income increases and decreases. They are not neccessarily proportional. Wealth is an accumulation of income that is not spent every year.

I'm not talking about currency, I'm talking about wealth. if there were no production of goods and/or services, Wealth would decrease naturally. Bottles of wine would be drank, chairs would break, houses will age and weather.

The gross national product is a measure of income; the best estimate of real national product, however, is NNP, or net national product. It is equal to income minus depreciation. The reason why wealth always increases is because this value is always positive; however, depreciation is directly proportional to wealth, so the more wealth that exists, the smaller this value will be, assuming constant income. However, since income grows along with wealth, a situation in which wealth will decrease is virtually impossible.

[Lawrence of Arabia]

I think that in this case we should use GDP and not GNP for obvious reasons.

[DuncanK]

Originally posted by Goingonit
I've read the book. The point I was trying to make was that money is very different from wealth. Do you accept that? If so, we can move on. If not, explain why.

First, I have to say that I may have indeed misrepresented Adam Smith unintentionally. Adam Smith did not consider that the money accumulating within his economy was ever being stored. He considered it all to be in circulation. I made it sound like he considered this money to be wealth (in the terms that I'm talking about wealth in this thread). I'm talking about wealth that is kept purely as a store of value, or for speculative purposes.

I have to say though, that I'm sure that the people during that time did keep money for the purposes of storing value. They did this when they expected an increase in the price of gold or whatever their money was made out of. When they expected the value of their money to decrease all of their money went into circulation I'm sure. Whenever they stored their money it became their wealth. So in that sense money can be wealth.

Originally posted by Goingonit


The point he makes in that passage is that storing gold doesn't result in any real increase of national purchasing power or wealth. I agree with that. I hope you agree with that.

Again I say that he did not assume that people were storing their gold. But I would agree that he is saying that as the gold in circulation increases the 'wealth' (to use the term the way that he uses it) of the nation does not increase.

Originally posted by Goingonit

And BTW, my last post refers to your post about an increase of wealth not leading to an increase in income.

Ok, I'll look at that again

[DuncanK]

Originally posted by Goingonit


I'm not talking about currency, I'm talking about wealth. if there were no production of goods and/or services, Wealth would decrease naturally. Bottles of wine would be drank, chairs would break, houses will age and weather.

Tangable items will of course be consumed. I think financial wealth would decrease also. The people who had it would spend it.

Originally posted by Goingonit

The gross national product is a measure of income; the best estimate of real national product, however, is NNP, or net national product. It is equal to income minus depreciation. The reason why wealth always increases is because this value is always positive; however, depreciation is directly proportional to wealth, so the more wealth that exists, the smaller this value will be, assuming constant income. However, since income grows along with wealth, a situation in which wealth will decrease is virtually impossible.

Here your only talking about wealth that is stored in tangable items, right?

[DuncanK]

btw, I'm also interested in moving on and discussing a wealth tax as opposed to an income tax.

EDIT: I'm not quite sure that we are not on the same page as to what wealth is though.

I will post again on my position of what the different types of wealth are.