Quote:
Originally Posted by Flash Walken
We're all capitalists here, right?
We want as much capital in the economy as we can, that means as much purchasing as possible.
If the end game is to be capitalists and have as much capital in play as possible, income taxes should be the highest priority, rather than taxes on commerce. By taxing consumption you encourage consumption reduction, which stifles the economy artificially.
By taxing income you encourage less hoarding of income in the form of savings. An individual can only spend so much money in their respective economy. You can only eat out so many days of the year, you can only go to so many concerts and buy so suits. Even the hyper rich can only buy so many houses and so many cars.
By reducing the amount of income that can be taken out of the commercial economy, the more vibrant and diverse commerce will be.
Taxing commerce, a consumption tax, artificially removes potential purchasing power disproportionately against those who simply have less purchasing power to begin with.
Tax Murray Edwards more and he still buys the same amount of coffees at starbucks per year. Tax someone more every time they buy at starbucks, Murray will still be buying the same amount per year, but Locke, Slava and crazy_eoj might start cutting back on their visits as they tighten their belts.
This isn't some class warfare manifesto, it's the historical perspective on what the conditions were when Canada and the United States were at their greatest heights. There is evidence of what works, and mounting evidence of what doesn't. I'm not saying a consumption tax can't work or be applicable, but it's definitely not what I would look at first.
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I understand what you're getting at, but the fact is that the consumption tax is no more punitive than income tax. Firstly, the overall amount of money collected in taxes from the system as a whole is the same; so the overall money in circulation shouldn't change in either system. I'm not advocating a tax hike here, I'm talking about collecting the same amount of taxes in a different manner. So rather than someone receiving their wage after taxes are withheld, they will receive all of their wage (we'll still have the EI, CPP and other such deductions of course), but everyone would retain more of their income. From there they can make the decision on how and where to spend. I would advocate that areas like food and other necessities are not taxed, so we're really talking about discretionary spending.
Second, and I think that this is critical to note, is that most people are not budgeted so tightly in terms of their spending habits that a consumption tax is going to cause them to buy or not to buy. I mean in all honesty, how many of us have traveled elsewhere and paid these taxes having no idea how much they were and what they applied to? In the US for example some counties have taxes and others don't. I know that when I have been there I basically have no idea, and frankly if I assume that the total should be about $50 if it turns out to be about $55 I'm not entirely shocked. Sure there are exceptions and certain cases where this would have an impact, (large purchases for example), but lets not forget that (a) other provinces and jurisdictions have significantly higher VATs and it works just fine and (b) you will take home 10% more on every pay cheque to begin with.
I actually would put forth the idea that people would spend as much or more with this idea just based on their pay cheque being that much larger to begin with. If you give a family say $10k a year (based on $100k household income and them keeping that 10%), I have a hard time seeing everyone make the decision to just increase their bank account by 10%. Maybe that money gets invested (good for the economy for sure), maybe it gets spent the same way as today, or maybe it gets frittered away on little things here and there over the course of a year. Regardless though, this seems like a net positive for the province and economy as a whole.