Tax Reform Thread

[KrazyHorse]

I wasn't seriously proposing it.

[Dauphin]

That's what her advisers said after the event.

[giblets]

It is the least distortionary tax (even less than tax on unimproved land value)

Wait, I thought taxes on unimproved land value didn't cause any distortions (as long as they're not too high). Or does forcing people to use their land for productive purposes qualify as a "distortion"?

[KrazyHorse]

Ask the Dutch what I mean.

[The Mad Monk]

I'll go see if Mr_B is busy.

[flash9286]

Yes, of course there would be. This would be a tax on risk-taking.

I don't think this actually true, assuming you can fully deduct your capital losses and you can adjust the amount of risk in your portfolio. Taxpayers will adjust to eliminate the tax.

[Kuciwalker]

Think about that for a while longer. You get a smaller marginal expected return on additional risk than without the tax. Therefore it discourages risk-taking.

[flash9286]

Think about that for a while longer. You get a smaller marginal expected return on additional risk than without the tax. Therefore it discourages risk-taking.

I think you are ignoring that government takes on some of the risk buy allowing deductible losses.

http://www.entrepreneur.com/tradejou...118956239.html and http://papers.ssrn.com/sol3/papers.c...ract_id=488846 (the author cites more rigorous works in the article)

[KrazyHorse]

I don't think this actually true, assuming you can fully deduct your capital losses and you can adjust the amount of risk in your portfolio. Taxpayers will adjust to eliminate the tax.

So if I lose a million dollars in a year then the government is going to give me 350k at the end of the year?

[KrazyHorse]

That's very different than the way capital gains taxes work currently, BTW.

Also, I don't know what you think this will accomplish. It's equivalent to the government borrowing money at LIBOR and buying index funds (to the extent that the equities market is a proxy for the available pool of investments made by US taxpayers).

[KrazyHorse]

The only real difference I can think of is in situations where the division between labor and capital is unclear (e.g. startups). In all other cases the net effect is the government borrowing money to coinvest with the individual.

[notyoueither]

I don't think it's a coincidence that the recent reduction in the GST has decreased unemployment here. And unemployment in the GST era has been consistantly higher here than in the USA.

GST vs no tax is the proper comparison, not GST to a VAT. GST is a job killer when compared to no tax, as is the situation in the US.

The GST is a VAT, Ben.

Unemployment in Canada is higher now than before the GST was reduced from 7% to 5%.

Can you explain how our unemployment rate went up relative to that in the US after replacing a hidden tax of ~12% which was levied on exports with an open tax of 7% to which exports are immune?

The cash has to come from somewhere, Ben. Can you explain how a higher income tax would be preferable to a lower income tax with a VAT?

[KrazyHorse]

This is all assuming efficient markets, BTW. If markets are inefficient AND better investors tend to be more confident then this distorts markets against the efficient allocation of capital.

Actually, that's a relatively clever point. I bet there's a paper in that...

[KrazyHorse]

dp

[notyoueither]

That's because you have no understanding of economics.

I understand there's a lot I don't know about it. I also understand that you are pretty full of misplaced arrogance.