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InvisibleSilversoul
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Taxation: A Comparative Analysis
    #4076186 - 04/20/05 10:31 AM (11 years, 7 months ago)

One of the replies in the Graverobber Tax thread gave me an idea. I've decided to provide for you guys a cost-benefit analysis of different types of tax to put things in perspective. I've decided to mainly include the types of tax currently used and the types that people here have advocated. If I left any type of tax out, let me know and I'll add it. Since I know JC is going to harp on me about this, I'll clarify that when I speak of a tax being progressive or regressive, I'm speaking of where the burden falls, with progressive taxes falling most heavily on the wealthy, and regressive taxes falling most heavily on the poor(this is the way most people use those terms). When I speak of something being progressive or regressive by design, I mean that it is intentionally altered to be that way through planning, whereas if something is inherently progressive or regressive, then it is that way simply by the nature of the tax. When I refer to unearned income, I mean income which was produced not by voluntary contributions of labor, but rather by natural wealth, externalities of others' labor, and monopoly holdings.

Personal Income Tax

Pros:
  • Inherently progressive("progressive" income taxes add a design element to this)
  • Good at generating revenue
  • Taxes net income, taking account of expenses
  • Captures some unearned income

Cons:
  • Discourages productivity
  • Highly involuntary, as people must work to live
  • Makes no distinction between earned and unearned income
  • Requires large bureacracy to enforce(IRS)
  • Complex and stressful for taxpayers


Corporate Income Tax

Pros:
  • none

Cons:
  • Get passed on to the consumer
  • Double-taxation
  • Involuntary
  • Encourages shady book-keeping


Capital Gains Tax

Pros:
  • Generally progressive
  • Captures some unearned income

Cons:
  • Discourages investment
  • Doesn't differentiate between earned and unearned income


Estate Tax

Pros:
  • Captures some unearned income
  • Doesn't harm productivity of living descendant
  • Progressive

Cons:
  • Easy to cheat
  • Doesn't differentiate between earned and unearned wealth
  • Can have some negative effect on productivity of estate-owner


Sales Tax

Pros:
  • Discourages harmful consumption
  • Somewhat voluntary, as one can live with varying degrees of consumption
  • Encourages investment

Cons:
  • Artificially inflates prices
  • Inherently regressive, as poor people spend greater portion of their income on essential goods
  • Doesn't differentiate between harmful and beneficial consumption, and thus discourages both
  • Harms sales, and thus harms businesses and employees
  • Easy to cheat
  • Taxes retail only, so produced and recycled goods are taxed equally
  • Captures almost no unearned income


Fair Tax?link

Pros:
  • Offsets regressiveness of sales tax with federal rebate
  • Discourages harmful consumption
  • Somewhat voluntary, as one can live with varying degrees of consumption
  • Encourages investment
  • Lets people keep their income

Cons:
  • Artificially inflates prices
  • Burden falls heaviest on middle class
  • Doesn't differentiate between harmful and beneficial consumption, and thus discourages both
  • Harms sales, and thus harms businesses and employees
  • Easy to cheat
  • Taxes retail only, so produced and recycled goods are taxed equally
  • Adds additional burden to current state sales taxes
  • Captures almost no unearned income


Green Taxlink

Pros:
  • Differentiates between beneficial and harmful consumption
  • Internalizes negative externalities(full-cost accounting)
  • Encourages sustainable development
  • Interferes very little with the market
  • Captures some unearned income
  • Lets people keep most earned income

Cons:
  • Some "harmful consumption"(i.e. carbon emissions) is controversial
  • Somewhat regressive
  • Does not account for land monopolies


Tariffs

Pros:
  • Primarily affect foreign goods
  • Can protect jobs at home from outsourcing

Cons:
  • Increase cost of goods
  • Protection of one industry often harms another
  • Regressive
  • Does not capture unearned income


Property Taxes

Pros:
  • Difficult to cheat
  • Captures some unearned income

Cons:
  • Two taxes in one: taxes both land and improvements
  • Discourages development
  • Contributes to urban sprawl
  • Generally regressive


Land Value Taxlink

Pros:
  • Captures all unearned income and only unearned income
  • Easy to collect, difficult to cheat
  • Inherently progressive
  • Encourages sustainable development
  • Increases employment and wages
  • Does not affect price of consumption goods
  • Does not increase price of land(you pay it either way)
  • Decreases and even reverses urban sprawl
  • Encourages production
  • Makes land ownership easier for everyone
  • Makes public utilities self-sustaining
  • Decreases the need for several government programs
  • Encourages responsible use of land
  • Cost cannot be passed on to anyone

Cons:
  • Difficult to implement at federal level, and therefore not likely to catch on quickly
  • Falls heaviest on major landowners, who exert major political influence
  • Most people haven't heard of it
  • Difficult concept to understand(but easy to live with)



If you have anything to add, anything you object to, or any questions or comments, feel free.


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Edited by Paradigm (04/20/05 11:07 AM)


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Offlinezappaisgod
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Re: Taxation: A Comparative Analysis [Re: Silversoul]
    #4077841 - 04/20/05 06:17 PM (11 years, 7 months ago)

Is interest on bonds unearned? How about bank interest? How about interest on mortgages (somebody has to supply the money, for everybody who pays interest somebody else collects it)? What about stock gains? Real estate gains? What if I invest in a friends business venture and it takes off and I make money? What if it fails and I lose money? Is that an unearned loss? If I buy a house, renovate it and sell it for a profit, are those gains earned? What if I hire someone to do the work and am just the money man? If I do it myself is some of the profit earned (what I would have been paid for the work normally) and some unearned? If I live in a house for 20 years, the value quadruples (doubles every 10 years) is that unearned? Is it even a gain?.

Earned, shmearned. Income is income and should all be treated the same. The example of the house held for 20 years is included to illustrate that sometimes gains are not gains. That is why there are exclusions on gains for houses held more than two years for up to, I think $200,000, for each spouse. You can do it more than once too, but you have to have lived in the house.


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InvisibleSilversoul
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Re: Taxation: A Comparative Analysis [Re: zappaisgod]
    #4077860 - 04/20/05 06:23 PM (11 years, 7 months ago)

A bond is something created by human effort. So is a bank account. Same with all the things you mentioned. Land is not. This has nothing to do with interest, and everything to do with effort. I've been through this time and time again. You did not create the land, and being there first does not give you the right to exploit your neighbor's labor(which is how land rent is created) for profit. This is very different from the time value of money, on which other forms of interest are based.


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Offlinezappaisgod
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Re: Taxation: A Comparative Analysis [Re: Silversoul]
    #4078073 - 04/20/05 07:14 PM (11 years, 7 months ago)

Quote:

Paradigm said:
When I refer to unearned income, I mean income which was produced not by voluntary contributions of labor, but rather by natural wealth, externalities of others' labor, and monopoly holdings.





Natural wealth? What is that? Externalities of other's labor? One example please for this thick old man. Monopoly holdings? Um, do you mean income derived from, say, Cablevision stock or Con Ed stock?

As far as I know, the United States is entirely deeded. That is, someone or something (i.e. federal government)owns every bit of it.


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Offlinezappaisgod
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Re: Taxation: A Comparative Analysis [Re: zappaisgod]
    #4078094 - 04/20/05 07:19 PM (11 years, 7 months ago)

Are you saying that there should be no land ownership? This is a pipe dream. You might as well wish for aliens to come and take us to Planet Claire.


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InvisibleSilversoul
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Re: Taxation: A Comparative Analysis [Re: zappaisgod]
    #4078703 - 04/20/05 09:54 PM (11 years, 7 months ago)

Quote:

zappaisgod said:
Natural wealth? What is that? Externalities of other's labor? One example please for this thick old man. Monopoly holdings? Um, do you mean income derived from, say, Cablevision stock or Con Ed stock?



Natural wealth = natural resources, i.e. wealth created by nature, not by man. Externalities of other's labor = land rent, which is created not by the landowner, but by neighboring sites. Monopoly holdings = pretty much the same as what I just said. Any monopolization of that which nobody created.

Quote:

As far as I know, the United States is entirely deeded. That is, someone or something (i.e. federal government)owns every bit of it.



In title, yes. But that is a government-granted privilege, not a natural right.


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InvisibleSilversoul
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Re: Taxation: A Comparative Analysis [Re: zappaisgod]
    #4078707 - 04/20/05 09:56 PM (11 years, 7 months ago)

Quote:

zappaisgod said:
Are you saying that there should be no land ownership? This is a pipe dream. You might as well wish for aliens to come and take us to Planet Claire.



No, I'm simply saying that land ownership should not be absolute. One may secure a piece of land for their own use, but this does not mean they are entitled to the profits of the site value. Those profits are created by everyone in the community, and should be distributed accordingly, whether as services(see part about land value tax) or as an equal dividend.


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InvisibleSilversoul
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Re: Taxation: A Comparative Analysis [Re: Silversoul]
    #4078720 - 04/20/05 10:00 PM (11 years, 7 months ago)

Aw heck, forget the whole earned vs. unearned wealth part. Just ignore it and compare the different taxes without it. I don't think it'll make much difference in terms of which one is clearly the best.


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