Friday, May 02, 2014

Taxes and Marginal Revolutions

Some on the left argue that consumption taxes will favor the ultra-rich because they consume a very small share of their income.  But if that’s so, then no tax regime will put much of a tax burden on the ultra-rich.  Just as you can’t squeeze blood from a stone, you can’t put a tax burden on misers.  As Steven Landsburg pointed out in one of my all time favorite posts, society views misers like Scrooge as being selfish individuals, when actually it’s people who consume a lot who are selfish. Misers leave more for others to consume.
In my only slightly cynical view, a lot of the debate about taxation is more about showing the wealthy that they need to lose (or win, on the other side of the debate) a few political battles than it is about actual canons of efficiency or for that matter even well-specified theories of egalitarian justice.  For instance I find that few proponents of a higher inheritance tax realize it will increase currentconsumption inequality, by encouraging the wealthy to consume more rather than paying the tax.  Nor do they seem to care, once this is pointed out.  I call this “the comeuppance” theory” and it is another example of Robin Hanson’s motto that “politics isn’t about policy,” but rather is a spat about which monkeys should have a higher or lower status.
Scott’s post is here, and it contains other points of interest.