I no longer believe in capitalism. At all.

[Kuciwalker]

See #29. You just take a completely standard progressive income tax and add a deduction/penalty for saving/dissaving. At your option you can exempt certain items like food; administratively, the easiest way to do that would probably be something like a rebate to the retail outlet (since asking people to save their grocery coupons and attach them to a tax return would be stupid).

[kentonio]

See #29. You just take a completely standard progressive income tax and add a deduction/penalty for saving/dissaving. At your option you can exempt certain items like food;

Isn't it a fair assumption that higher income earners are far more likely to have sufficient money to be able to save as opposed to low income earners who will be spending much more of their income on consumption?

administratively, the easiest way to do that would probably be something like a rebate to the retail outlet (since asking people to save their grocery coupons and attach them to a tax return would be stupid).

How does that help the consumer? Are you assuming the retailers would drop their prices to compensate?

[Kuciwalker]

Isn't it a fair assumption that higher income earners are far more likely to have sufficient money to be able to save as opposed to low income earners who will be spending much more of their income on consumption?

The problem is that this thinking is backwards.

The thing we want to tax is consumption. We want to take stuff from those who have a lot, and give it to those who have little. Someone with a large number in a computer somewhere may look like they have a lot, but they actually aren't making any kind of claim on society's resources until they draw down that number and spend it on a bunch of stuff.

Another way of seeing this: if I earn a bunch of income, save it, and never actually draw down those savings, I have basically given a gift to society. I produced a bunch of widgets (or whatever it is I do at my job) and, in exchange for those widgets, I let people give me numbers in a computer. Society gets to enjoy the use of those widgets, while I get to enjoy the use of... the number. It's basically charity, but rather than going to a specific individual, it is giving to everyone not-me.

Now, if I do draw down those savings in the future, then I am making a claim on society's resources, resources that could have gone to someone else. And when that happens, I get taxed - because my income gets adjusted upwards for the dissaving.

You know all the rich and spendthrift movie stars, sports stars, etc.? The current tax code encourages their lifestyle of gross and excessive luxury. A consumption tax, by contrast, discourages their lifestyle and encourages a more sedate, responsible one where people don't spend money just because they can on frivolities to demonstrate that they are rich.

How does that help the consumer? Are you assuming the retailers would drop their prices to compensate?

In the extreme short term, prices might not adjust, but yes in the 'long term' (think at most a year or two) they would. Grocery prices are pretty flexible, they move around all the time.

[Fake Boris]

What you're proposing indirectly exists through tax credits for saving, which most countries have in some form.

[Kuciwalker]

What you're proposing indirectly exists through tax credits for saving, which most countries have in some form.

Extremely limited forms.

[kentonio]

The problem is that this thinking is backwards.

The thing we want to tax is consumption. We want to take stuff from those who have a lot, and give it to those who have little. Someone with a large number in a computer somewhere may look like they have a lot, but they actually aren't making any kind of claim on society's resources until they draw down that number and spend it on a bunch of stuff.

Another way of seeing this: if I earn a bunch of income, save it, and never actually draw down those savings, I have basically given a gift to society. I produced a bunch of widgets (or whatever it is I do at my job) and, in exchange for those widgets, I let people give me numbers in a computer. Society gets to enjoy the use of those widgets, while I get to enjoy the use of... the number. It's basically charity, but rather than going to a specific individual, it is giving to everyone not-me.

Now, if I do draw down those savings in the future, then I am making a claim on society's resources, resources that could have gone to someone else. And when that happens, I get taxed - because my income gets adjusted upwards for the dissaving.

You know all the rich and spendthrift movie stars, sports stars, etc.? The current tax code encourages their lifestyle of gross and excessive luxury. A consumption tax, by contrast, discourages their lifestyle and encourages a more sedate, responsible one where people don't spend money just because they can on frivolities to demonstrate that they are rich.

Why in the name of god do we want to discourage spending, which is nothing more than money fed back into the economy? What good does it do society to have people sitting with piles of money in their banks not actually doing anything with it?

I also question which of us is indulging in backward thinking here. You seem to be arguing about the effects of consumption on society, whereas I'm looking at it from the standpoint of people contributing back into society through taxation. Why should someone on a vast income avoid contributing back to society because they choose to sit and let most of it collect in an account somewhere where it is helping no-one, while a poor person has to contribute a significant portion of their income because a certain level of consumption is unavoidable?

Oh and in case I didn't make my questions clear enough in the first paragraph: why in gods name is consumption bad?!

[Fake Boris]

Extremely limited forms.

Let's give the example of Canada.

1) No capital tax on the 1st residential building you own
2) Tax deductible retirement savings up to $18k/year
3) Tax-free savings account, contribution limit of $5K/year (not related to #2)

This covers the saving needs of 90% of people.

[Kuciwalker]

Why in the name of god do we want to discourage spending, which is nothing more than money fed back into the economy? What good does it do society to have people sitting with piles of money in their banks not actually doing anything with it?

Again: this is exactly backwards. The economy doesn't need people to feed it money; if for some reason we don't have enough money, the central bank can always just print some more. Money is free.

What the economy needs more of is actual stuff, and it needs to ensure that that stuff is given to the people who need it, not the people who already have more than they could ever use.

I also question which of us is indulging in backward thinking here. You seem to be arguing about the effects of consumption on society, whereas I'm looking at it from the standpoint of people contributing back into society through taxation. Why should someone on a vast income avoid contributing back to society because they choose to sit and let most of it collect in an account somewhere where it is helping no-one, while a poor person has to contribute a significant portion of their income because a certain level of consumption is unavoidable?

The person sitting on a vast pile of money has already contributed to society. That's what he does when he does his job. Let's say you are JK Rowling; you have produced a huge amount of value for society by writing some really popular children's books that made lots of kids very happy. In return, society gave you green pieces of paper. That is an amazing deal; we can print enormous quantities of green paper for almost no cost, whereas it is really, really difficult to produce children's books of similar quality to Harry Potter.

Now, if JKR then goes to a bunch of shops and exchanges those green pieces of paper back to society for a really expensive car, and hires a bunch of construction workers to build her a really enormous house, and hires a bunch of cooks to prepare amazing meals for her, she's now asking society give her tons of valuable stuff in return for Harry Potter, rather than cheap paper. Society is much worse off; all of those auto workers and construction workers and cooks could have been making that stuff for everyone else but now all of their output is dedicated solely to her.

Oh and in case I didn't make my questions clear enough in the first paragraph: why in gods name is consumption bad?!

Consumption per se is not bad; consumption makes you happy. However, consumption by one person is to the exclusion of consumption by someone else; society has limited resources. Therefore we want to discourage additional consumption by those who have little use for it (those who are already consuming large quantities of resources), so that we can redirect those resources to those who have a lot of use for it (those who are poor and therefore consuming few resources).

[Jaguar]

Let's give the example of Canada.

1) No capital tax on the 1st residential building you own
2) Tax deductible retirement savings up to $18k/year
3) Tax-free savings account, contribution limit of $5K/year (not related to #2)

This covers the saving needs of 90% of people.

Wow, that's much better policy than what we get in the US. Score one for Canada.

[Kuciwalker]

Let's give the example of Canada.

1) No capital tax on the 1st residential building you own

An insane distortionary system that causes people to choose to own their residence rather than rent.

2) Tax deductible retirement savings up to $18k/year
3) Tax-free savings account, contribution limit of $5K/year (not related to #2)

This covers the saving needs of 90% of people.

Those are excellent programs, but need to be unlimited. They cover 90% of people but not 90% of savings.

[Kuciwalker]

Wow, that's much better policy than what we get in the US. Score one for Canada.

It's better to the tune of $1100/year. 401(k) is capped at $16,900/year. (Actually it may have been bumped up last year, I forget).

[Jaguar]

An insane distortionary system that causes people to choose to own their residence rather than rent.

To be clear, the US has this too - we just encourage people to own their houses on leverage, which is even worse.

[kentonio]

Again: this is exactly backwards. The economy doesn't need people to feed it money; if for some reason we don't have enough money, the central bank can always just print some more. Money is free.

What the economy needs more of is actual stuff, and it needs to ensure that that stuff is given to the people who need it, not the people who already have more than they could ever use.

The person sitting on a vast pile of money has already contributed to society. That's what he does when he does his job. Let's say you are JK Rowling; you have produced a huge amount of value for society by writing some really popular children's books that made lots of kids very happy. In return, society gave you green pieces of paper. That is an amazing deal; we can print enormous quantities of green paper for almost no cost, whereas it is really, really difficult to produce children's books of similar quality to Harry Potter.

Now, if JKR then goes to a bunch of shops and exchanges those green pieces of paper back to society for a really expensive car, and hires a bunch of construction workers to build her a really enormous house, and hires a bunch of cooks to prepare amazing meals for her, she's now asking society give her tons of valuable stuff in return for Harry Potter, rather than cheap paper. Society is much worse off; all of those auto workers and construction workers and cooks could have been making that stuff for everyone else but now all of their output is dedicated solely to her.

Consumption per se is not bad; consumption makes you happy. However, consumption by one person is to the exclusion of consumption by someone else; society has limited resources. Therefore we want to discourage additional consumption by those who have little use for it (those who are already consuming large quantities of resources), so that we can redirect those resources to those who have a lot of use for it (those who are poor and therefore consuming few resources).

Are you actually a communist who's been masquerading as a capitalist all this time?

[Kuciwalker]

No, everything I said is the majority view of right-wing economists.

[Jaguar]

We want stuff for the poor. We want everyone to live as well as we do.