Dear Tom, By "neutral" I actually thought you mean one that wouldn't prejudice people's economic behavior. Opponents of the income tax often accuse it of discouraging work, saving, and investment and encouraging consumption. I thus thought that a "neutral" tax by comparison would be one that didn't favor consumption over saving, or saving over consumption, or one sort of consumption/saving over another. By that definition I can't imagine any neutral tax.
Do you regard gasoline taxes as less evil than income taxes because gas taxes tax consumption instead of saving, or becaue gas taxes in theory at least attempt to match the tax to a funded benefit, in this case highways. (I say, "in theory" because in reality the federal gas tax trust fund has no more substance the social security trust fund; both are accounting fictions.) I've never been persuaded that government should intervene in individuals' free-market choices between consumption and saving, and while it may do so through the income tax, I don't believe that government should turn around and do the same thing in the opposite direction by replacing the income tax with a national sales tax (not that I believe, as Susan pointed out, that such a wholesale replacement has any chance of success). Some years ago I discovered that one major think-tank had come to the same conclusion, and thus proposed a federal tax system funded in part by a 15% flat tax and in part by a 15% national sales tax. While I find the attempt to avoid intervening in individuals' choices between saving and consumption, I also fear that both taxes would ultimately grow in complexity and that Congress would raise the rates under both, and that furthermore a national sales tax might easily devolve into what seems to me the most pernicious of all taxes: the value-added tax. While I enjoy discussing what tax system may or may not be less undesireable in theory, I see little evidence that there's any chance for even substantial change in the current system at the moment, much less a fundamental restructing. It seems on the contrary that the US and perhaps even most of the world seem to continue to drift in an increasingly statist direction. Does anyone seen evidence to the contrary? DBL In a message dated 1/17/03 4:58:20 AM, [EMAIL PROTECTED] writes: >Fred, (& Susan) > >> even more than direct/indirect, you need to specify what is "neutral". > > > >You have not yet adequately done so. > > > >As I try to do this, I realize that neutral must apply to some other characteristic, >like a car's "neutral color", or a car "in neutral" (gear). > > > >So, a policy change can be "revenue neutral", clearly meaning total revenue >is the same before, and after, the policy change. > > > >Thus, increasing a land tax and decreasing other local taxes can be revenue >neutral, (and I would support such a change) but insofar as it will encourage >some behavior and discourage other (eg idle land will cost more), it is >NOT "incentive neutral". > > > >Reducing dividend taxation will encourage more companies to pay out dividends, >and more capital investment (stock price increases) in those companies >that do pay more out (often not tech companies). > > > >I must say I favor ALL tax reduction proposals that mean less total gov't >revenue, despite relative favoring of some less evil taxes (gas tax) as >compared to more evil (income tax). > > > >Tom Grey
