Remember, there is no choice with income tax. But there is with consumptive tax. A selective application of taxes on raw resources would direct our economy towards recycling and judicial use of resources. Items whose value is based primarily on human resources would be relatively cheap. But people who “need” to fly all over the place will think twice before consuming an extra portion of crude oil. And our economy which is always looking to cut out jobs will be redirected to better use of resources.
<sogh>- again, replacing the Income tax with a VAT or consumption tax is completely impractical. The rate would have to be so high, that complaince would be a nitemare. It simply would not work. Now, we coud ADD a national sales or VAT to the FIT, and then reduce the FIT, especially for those in the lower brackets.
Common argument, but it doesn’t stand up. There can only be disincentive effects due to income tax if people can substitute away from work (or other productive activities). You can only do this if there is a choice involved with income tax. You can pay less by earning less income. Same with consumption taxes: you can pay less by consuming fewer market commodities. But that is why people bother to earn income: to buy stuff. Sure you can save it and not consume now, but when you (or your heirs) later dissave and buy stuff, they are taxed. So unless you like money for the pretty pictures printed on it, choosing to consume less means choosing to work less. Both taxes are voluntary to the same puny degree.
Picmr, by choice I do not mean by consuming less overall. I am not for an across the board sales tax. I am for a tax on raw resources that can vary according to long term availability, negative environmental impacts and other negative social impacts. Right now we merrily ignore energy alternatives and consume crude oil to the detriment of future generations let alone ourselves like there is no tomorrow. But we constantly attempt to repair our homes and vehicles ourselves in order to avoid the tradesman who can do the job much quicker and better. Why? Because there is a whole host of taxes between you and the tradesman before he can complete the job. Man, before he can give your 20 bucks to his wife for the groceries, he’s got cover another 10 or so for the government. That is disincentive.
You simply cannot generate enough revenue from simply taxing non-renewable resources. Especially since at the same time you are planning on the taxation to work as a disincentive to actually use those resources. If using natural resources imposes a social cost (negative externalities) then there can be an argument for efficient taxation on them. However, just because a resource is non-renewable is not the same as a negative externality. Taxing a resource for conservation purposes distors relative prices to inputs and undoubtedly creates a drag on the economy.
In terms of efficiency, a tax that does not distort relative prices would be ideal. This would be a flat consumption tax. However, since equity is also a concern then a flat consumption tax with an exempted amount might be best. When discussing taxation it is often described as a three-legged stool (as picmr has discussed): Equity, Efficiency, and revenue. Trying to balance these three is the key and ANY tax system must take into accout all three. And just ofr clarity equity is not just, those who make more pay more, it also means those who are the same pay the same.
Sorry for being less focused in my response then picmr.
Yes Tretiak, but no “shutout”
You will agree that all taxes are a drag on the economy, income or consumptive. But you would rather see high unemployment than a reduction in fossil fuel consumption and polution. Your option to deal with that problem would have to be more legislation and enforcement. Of course that would require more taxable jobs particularly in enforcement and the legal profession.
[nitpick] A consumptive tax (as opposed to a consumption tax) would be coughing up blood. [/nitpick]