If the government told you it was getting rid of all taxes apart from a single kind, which it was then going to boost to meet its revenue needs, then which kind of tax would be least destructive to the economy?
Income tax? Property tax? Sales tax? Printing money? Capital gains tax? Sin tax?
Does it not matter, because the economic harm caused by the tax is basically the same magnitude as the amount taxed? Or does it matter?
I would think capital gains tax would be among the worst since it directly discourages investment and economic growth. And my quick guess is that sin tax would be the least harmful since it discourages "wasteful" consumption and production of "bad" products, although the government would probably have to extend the sin tax to all kinds of products (like soda and candy, like they're trying to do in my State) to collect enough revenue.
poll tax
The only justifiable "tax" would be a tax on voting. This would also be the least economically destructive tax, since everybody would be able to avoid it by merely refraining from voting.
You have to remember that "sin" taxes are just as bad because people engage in "sin" activities because they enjoy such activities. By taxing "sin" activities, you are, in fact, taxing some of the most utility maximizing activities (e.g. taxing alcohol would greatly reduce the utility of people who love to drink).
Political Atheists Blog
I think a tax on land value would be the least destructive tax. It would also be avoidable if you choose not to own land. If we continue to treat land as property, this is the only tax I would support.
Flat, wealth tax performed in the manner of a lottery. Basically, the government draws a bunch of names from a hat. Then, the government raids the properties of the hapless victims whose names it drew from the hat and takes X% of all the wealth they can find. No penalties for tax evasion, so it would be catch-as-catch-can.
Most citizens would not have to pay taxes most of the time. This would be a massive boost to the economy since the economic distortions created by taxation are probably more costly to the economy than the actual revenues lost. If the government starts getting too greedy, people will take more pains to hide their wealth better, reducing the government's effective revenues.
It's not a pretty system, but it's at least honest about what taxation is and it would manage to free most economic activity from taxation most of the time. Because of the random nature of taxation, there would be no systematic effect on the economy so being a victim of taxation would be more like suffering a natural disaster or random criminal violence than central-planning.
Clayton -
dude6935:It would also be avoidable if you choose not to own land.
False. The costs of the tax would be passed on to tenants, consumers, workers, and investors.
krazy kaju: You have to remember that "sin" taxes are just as bad because people engage in "sin" activities because they enjoy such activities. By taxing "sin" activities, you are, in fact, taxing some of the most utility maximizing activities (e.g. taxing alcohol would greatly reduce the utility of people who love to drink).
There is absolutely no way of doing utilitarian calculus to see whether people are better off or worse off after they are not allowed to drink alcohol, and there is no way of knowing whether the outcome of such restrictions is favourable or unfavourable to people.
As it is, it's not like even alcohol has not even imperfect substitutes, because if enjoyment were the purpose of a drink, it's not like one can't get enjoyment from playing golf, eating Italian food, or jogging.
As such, I find many of these utility-based arguments to be a little crude and imperfect, as if there is some fictional mystical lifeforce floating in the air called utility. I just feel that too often, we can be right for the wrong reasons, and utilitarian arguments are like that.
krazy kaju: dude6935:It would also be avoidable if you choose not to own land. False. The costs of the tax would be passed on to tenants, consumers, workers, and investors
False. The costs of the tax would be passed on to tenants, consumers, workers, and investors
Actually a land tax can't be passed on to tenants since the supply of land is (for all practical purposes) fixed. http://en.wikipedia.org/wiki/Land_value_tax#Efficiency
baxter wrote: If the government told you it was getting rid of all taxes apart from a single kind, which it was then going to boost to meet its revenue needs, then which kind of tax would be least destructive to the economy?
I don't tend to believe, trust or engage with people who are willing to use violent aggression (i.e. sociopaths). Answering their question is nonsensical.
Of course how you tax matters. If all taxes were wealth taxes on doctors, we'd have precious few doctors and the price of medical care would make today's state-inflated prices look like small potatoes. That's why I'm not actually kidding about the above proposal. Given that people want to be taxed, they ought to prefer to be taxed in a way that minimizes the economic distortions and other "unintended consequences" of taxation. I don't see how you can accomplish that with any form of directed taxation. Taxation would have to be random event.
I would have been tempted to say a tax on luxuries. But that would lessen the incentive to grow rich, depriving us of the services of some of the rags to riches people.
It wasn't a utilitarian argument. It was a subjective value argument.
Its also been argued that the Land Value Tax has zero deadweight loss.
Speaking of which, here's an interesting article on a Georgist-Austrian Synthesis, of all things:
http://findarticles.com/p/articles/mi_m0254/is_n4_v56/ai_20381871/pg_7/
I'll give him credit (har har) for doing a good job of predicting the crash of 2007-08, in 1997. I'm not sure I buy his argument for the land value tax though. It seems that you might as well argue for an increase in the capital gains tax to prevent other bubbles.
the land value tax is a terrible tax based on terrible economics.
Rothbard pretty much demolished it in 2 pages if I remember rightly.
Where there is no property there is no justice; a proposition as certain as any demonstration in Euclid
Fools! not to see that what they madly desire would be a calamity to them as no hands but their own could bring
I would be interested to see that.