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And there are more benefits to this approach. A progressive consumption tax could (and should) go negative on the low end, eliminating the need for all of the distortive and complex subsidies that litter our welfare state (like Section 8 housing), and also could (and should) go above 100% on the high end, so billionaires burning millions of dollars of resources on vanity space trips could do a little more to help others. A progressive consumption tax is a simple and efficient way to bend the consumption curve into a more socially desirable shape without creating perverse incentives and with a minimum reduction in productivity. Our productive billionaires can continue their work unimpeded while the consumptive ones can start paying their fair share.

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I agree. But again, there are challenges in differentiating between consumption and investment. Thus a college education is a sort of investment in human capital, but many elite colleges provide a lavish consumption package to go along with it. Even vanity space travel will be claimed as "investment." But we shouldn't make the perfect be the enemy of the good, as income taxes also face these same dilemmas. As an aside for readers freaked out by your "above 100%" comment, rates are calculated differently in the two cases. Imagine 60% income tax imposed on an income of one million dollars. The guy pays $600,000 in taxes and consumes $400,000. That's a 150% tax on consumption, but more like a 60% tax on pre-tax income.

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I think this is what you're getting at, but at his previous site, I think I remember Scott used the example of a Warren Buffett type person who saved 99.9% of their vast income, and a profligate trust fund kid who spend all his (lesser) "income" on yachts and cocaine and hookers. He pointed out that an income tax will take much more from WB than TFK, and since we all accept that "to tax is destroy/disincentivize" then we should highly prefer a world where WB pays less taxes, (as his money is going to socially beneficial things like investment, charity or price deflation) and TFK pays more (since his spending is going to consumption, that reduces the amount of, uh, yachts, cocaine and hookers that the rest of us can consume).

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Yes, what you describe is pretty much exactly what I hope to accomplish: a tax regime where taxpayers contribute based on the value they are extracting from society, which is their consumption, instead of based on the value of what they are contributing to society, which is their income. I would be happy if TFK paid significantly more tax than WB, assuming TFK is consuming a lot more than WB, regardless of their incomes, and regardless of the nature of that consumption.

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