RE: taxes

[dhenwood@xxxxxxxxx (Doug Henwood)]

At 10:32 AM 3/31/95, Bruce McFarling wrote:
>Add up both effects and net it out: do those in the
>upper income groups spend a larger or smaller share of their income on
>consumption?

There's no dispute here - the richer you are, the less you devote to
consumption. The poorest quintile often spends >100% of income on
consumption, by drawing on savings or going into debt. I have some CBO
numbers somewhere on the distributional effects of a VAT, and I'll try to
dig them out.

Another point: VATs are very complex and expensive to administer, far more
so than an income tax. The compliance burden on business is also much much
higher.

Alan Isaac said:

>For example, a person with large stock holdings might
>generate no reportable income by consuming the proceeds
>from sales of his/her underperforming stocks. A consumption
>tax would in this case be successful in taxing individual
>wealth. We do not need to postulate any income from wealth
>for this to work.

Even I would find it hard to defend the principle of taxing a losing
investment. And if it's only a modest gainer, then that income would be
taxed.

Doug

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Doug Henwood
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