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05/15/2018

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ajkreider

I'm not sure I fully understand the "income tax as taxing future consumption" idea. It seems like this supports (inequitable) double taxation of savers - for they are taxed on their as yet unrealized future consumption, and then taxed again when they do use whatever is left over to consume. If I save for and then purchase a car, I still pay the sales tax on the car, even though the income generating those savings was also taxed.

Additionally, couldn't accumulated capital still be treated as potential future consumption? After all, we don't always know for what we are saving (unexpected needs, crises, etc.) The idea would be that any such capital not actually used to consume would then be taxed as an estate tax upon the death of the accumulator.

Eric Schliesser

One your first paragraph: savings nor income are supposed to be taxed if one is trying to argue for the equivalence of a consumption and an income tax.

On your second: yes, in such proposal accumulated capital is treated as potential future consumption alongside an estate tax. But this assumes that within a life-time unspent accumulated wealth is simply pointless. [But that's not true; try getting a mortgage without asssets.]

ajkreider

Right. I was thinking of application to contemporary jurisdictions, which - with the exceptions of tax havens and some oil monarchies - have both income taxes and consumption taxes. I suppose the justification for current tax regimes lies elsewhere.

On the second issue, there seem to be ways to handle it. For instance, I think in some jurisdictions, if you use previously un-taxed capital as collateral, it now becomes taxable as a realized capital gain. And, things like un-taxed retirement savings are not counted towards credit scores, just because of limits on access to those resources, etc.

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