WoW, I'm getting really lax about updating my journal. My extremely spotty internet access hasn't helped. However, things in the lab are about to slow down a tad so that may bode well for my SG presence in the near future, at least. I'm still basically dependent on efficient mouse breeding to do most of my experiments (after having finished this last behavioral series) and, well, they took a little hiatus in late december/early january, so now I have to as well. Also, my student has left the lab, he was only here for January, which means I'm back to being able to come in on my own schedule. We'll see how that works out.
So my girlfriend is now a member of SG, her screen name is toothpick. So go over and say hello. This is not optional.
I've had this weird idea kicking around in the back of my mind for a while, and I figured this is as good a place as any to put it down on paper. I'm going forward with the explicit caveat that I have absolutely no formal training in economics, so take this all with a gigantic grain of salt.
Anyway, as a thought experiment I was wondering what the results would be of shifting the tax burden away from personal income and towards two areas: inheritance and consumption. Before everyone jumps on me saying that consumption taxes, or value added taxes (VATs), disproportionately penalize low income consumers because they spend a larger proportion of their income than people who make more money, I was thinking about something along the lines of a graduated VAT. Which means that for lower cost, higher volume items like anything costing less than, say $100, the tax percentage would be very low. Like our current graduated income tax system, that first $100 would always be subject to the lowest amount of VAT, while say the next $100-500 would be taxed at a higher percentage, $500-2500 would be higher and so on. The idea being that the more one is able to spend on a particular item, the more they are able to afford to pay a higher tax rate on the "luxury price portion" of that item. Exceptions made in the case of buying a home, provided it be a primary residence (to prevent very wealthy people from buying up all the property in attempt to create literal tax shelters.)
The other major change would be to inheritance taxes. By completely removing an income tax it would eliminate any claims that inheritance, or estate taxes, represent "double taxation," or taxation on income that has already been subject to taxes. My proposed estate tax would be 100%. That's right - no more inheritance. The idea is based on the notion that hereditary income only serves to increase the gap between rich and poor and gives people who happen to be fortunate enough to have been born into wealthy families an unfair advantage when compared with people born into poorer families.
In theory it sounds great, especially the graduated VAT tax. However, working out the specifics of the 100% inheritance tax is difficult, to say the least. On the surface it appears that people would just spend all their money before they die to avoid having to just give all their money away, which would be stimulatory for the economy. But that's not human nature, and there thornier issues to deal with. For example, how to deal with something like a privately held corporation or a piece of land (farmers would be universally screwed)? It's not hard to imagine people incorporating themselves and making all of their assets company property in order to be able to will them to their children and avoid taxation. And how would non-liquid assets like paintings, furniture and houses by dealt with? Maybe a percentage based inheritance tax is better - like I said this is a thought exercise so I haven't reached any conclusions, I'm trying to figure it out as I go along.
The fundamental question remains - how to prevent the vast accumulation of wealth that is detrimental to our society and undermines the notion of a meritocracy? It's a hard question to answer - I'm willing to take suggestions, this is just an exercise.
So my girlfriend is now a member of SG, her screen name is toothpick. So go over and say hello. This is not optional.
I've had this weird idea kicking around in the back of my mind for a while, and I figured this is as good a place as any to put it down on paper. I'm going forward with the explicit caveat that I have absolutely no formal training in economics, so take this all with a gigantic grain of salt.
Anyway, as a thought experiment I was wondering what the results would be of shifting the tax burden away from personal income and towards two areas: inheritance and consumption. Before everyone jumps on me saying that consumption taxes, or value added taxes (VATs), disproportionately penalize low income consumers because they spend a larger proportion of their income than people who make more money, I was thinking about something along the lines of a graduated VAT. Which means that for lower cost, higher volume items like anything costing less than, say $100, the tax percentage would be very low. Like our current graduated income tax system, that first $100 would always be subject to the lowest amount of VAT, while say the next $100-500 would be taxed at a higher percentage, $500-2500 would be higher and so on. The idea being that the more one is able to spend on a particular item, the more they are able to afford to pay a higher tax rate on the "luxury price portion" of that item. Exceptions made in the case of buying a home, provided it be a primary residence (to prevent very wealthy people from buying up all the property in attempt to create literal tax shelters.)
The other major change would be to inheritance taxes. By completely removing an income tax it would eliminate any claims that inheritance, or estate taxes, represent "double taxation," or taxation on income that has already been subject to taxes. My proposed estate tax would be 100%. That's right - no more inheritance. The idea is based on the notion that hereditary income only serves to increase the gap between rich and poor and gives people who happen to be fortunate enough to have been born into wealthy families an unfair advantage when compared with people born into poorer families.
In theory it sounds great, especially the graduated VAT tax. However, working out the specifics of the 100% inheritance tax is difficult, to say the least. On the surface it appears that people would just spend all their money before they die to avoid having to just give all their money away, which would be stimulatory for the economy. But that's not human nature, and there thornier issues to deal with. For example, how to deal with something like a privately held corporation or a piece of land (farmers would be universally screwed)? It's not hard to imagine people incorporating themselves and making all of their assets company property in order to be able to will them to their children and avoid taxation. And how would non-liquid assets like paintings, furniture and houses by dealt with? Maybe a percentage based inheritance tax is better - like I said this is a thought exercise so I haven't reached any conclusions, I'm trying to figure it out as I go along.
The fundamental question remains - how to prevent the vast accumulation of wealth that is detrimental to our society and undermines the notion of a meritocracy? It's a hard question to answer - I'm willing to take suggestions, this is just an exercise.
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How come you've been thinking so much about economic problems lately?
I would answer your question, but my answer is almost the same for every US econ question: gradually de-regulate as many artificial government impedements as possible.
For me, econ is actually really simple. It's the volumes and volumes of laws and regulations that make it complex.
I don't mind rich people except only in one circumstance. Their funds are usually in one of three states: being spent, being saved/invested or in cash on person. The first case obviously redistributes the cash or wealth in a natural fashion (as natural as a rich person can be), and also generates healthy tax revenue. The second case the wealth is being invested by savings banks, invested in stocks or some other financial institution and that money is helping new and legitimate businesses grow. The third case is the only bad one, where the money is just floating out there; for some reason, the person has spent the money illegally or has a large amount of cash that they don't want in an institution.
That money is doing nothing, or worse, is doing something illegal and damaging to the economy. Usually these black market situations are caused by government controls, such as the "War on drugs" policy.
In my opinion, vast amounts of wealth are not the problem since inevitably that wealth is normally redistributed in the form of actual demand or is invested. It's the wealth that is held out of the economy totally that causes actual damage.
Are you on Deathwing yet? If so, what's your char name?