Two Certainties: Taxes and More Taxes

I didn't want to have to enter this fight, but considering most of what I studied in undergrad is taxation economics, here goes. I'd like to bring up another line of argument. You guys talk endless about equity and efficiency, but what you're really missing (and what everyone neglects), is the BENEFITS EQUITY principle. THAT is actually what Adam Smith points out in WON too. Fact is, the people that benefit from a service should pay according to how much they benefit. That in a sense is the economics holy grail, and it's where I part with 5th and a lot of lefties who want to stress vertical.

What you must do for benefits equity is actually tax poor people, because they use services, DAMMIT. So they should pay some taxes! Not only that, but it actually makes government more accountable because poor people who use services are paying money for it and don't want to see the money wasted. This is easy at state and local levels (which is why they are superior governments), but nearly impossible at national level. Now for another argument against National Sales Tax. Fact is, when it's used, it actually tends to increase the markup MORE than the amount of the tax. . . that's right. . .MORE! The reason is markets are not perfectly competitive, and therefore it distorts the game theory equilibriums of the way firms behave and set prices. Lots of work has been done on this by Rosen (EMPIRICAL STUDIES, PEOPLE) and also Anderson and Kreider. Most of the assumptions and models about where the burden of sales taxes go involve some kind of fiction related to perfectly elastic/inelastic supply/demand. In reality, it's more a fact of monopolistic competition and monopsonistic buying power. This means sales taxes cause chaos in industries and the competitive dynamics of different firms, and it even can tend to put firms that have a higher cost of production OUT OF BUSINESS because those with lower costs take their market share when the price rises with sales tax. One could argue this is efficiency enhancing because it gets rid of dead weight, but you NEVER know where the innovation in a market comes from, and sometimes its from startups, which tend to be higher cost.

Follow me? Didn't think so. I could draw a lot of game theory Cournot and Bertrand Price Equilibriums but I'll spare all of you who are still awake from that stuff.

Also, to briefly defend 5th. . .he's right in one sense, EXCEPT IN 401(K) and IRAs. You ARE taxed on principle, just read the screed on the National Sales Tax called Fundamentals of Tax Reform. You're taxed WHEN YOU EARN IT, unless you happen to slip it into one of the tax exempt accounts. That's why conservatives rant on and on about the double taxation of SAVINGS, or, the more crazy ones, THE INFINITE TAXATION of Savings, because it's taxed at the beginning and then each time you earn interest (CAVEAT: UNLESS IT GOES INTO A TAX EXEMPT ACCOUNT, THEN YOU'RE TAXED AT THE END). So you're lumped with an income tax once always, unless you follow before mentioned CAVEAT, and then you're lumped later when you take it out. THE DOUBLE TAXATION in dividends and investment is what TheCrimsonPride mentions.

Truth is, I advocate a moderate position that we should go with a CONSUMPTION tax, not a sales tax, but one that actually taxes income you consume, and exempts all income placed in savings accounts. This is what Thomas Hobbes had in mind when he said that one should always tax people for the resources they take from society (consumption) and not what they contribute (income). This would be closer to a benefits principle, and should include all forms of services and goods paid for, so richer people get to share more of the burden too. This is not quite the same as a sales tax, but a superior version, and does a better job at what the sales tax aims at. Flat taxes, there's no good argument against unless you believe in the declining marginal utility of income, but that's economic heresy to speak of. I don't nearly swing as liberal as 5th on his position on taxes, in which he's downright communist, but I think a national sales tax as the SOLE SOURCE of revenue goes too far and is too dramatic a change. Fundamental Tax Reform in the direction of a consumption tax is better. AND NO REBATES. . .Keep that benefits equity alive!

I never even applied to an Ivy League school, because I didn't want that kind of debt. Not only that, but it's too cold up north. . .brrrr. . .going to Syracuse for a year nearly killed me. . .no way I could've lived with any of those other New England Ivy League schools.

Me eat now.