My golly Keith, back to the Purchase Tax.
You'll recall that washing machines were deemed luxuries and got 100%
PT.
Harry
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Henry George School of Social Science
of Los Angeles
Box 655 Tujunga
CA 91042
Tel: 818
352-4141 -- Fax: 818 353-2242
http://haledward.home.comcast.net
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From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED] On Behalf Of Keith Hudson
Sent: Sunday, December 07, 2003 12:34 PM
To: [EMAIL PROTECTED]
Subject: [Futurework] A new basis for taxation which could catch criminals, too
However, I would like to dispense with income tax altogether and have a sales tax instead. A sales-based tax with higher bands for the higher-priced goods would be progressive in a positive way and would be an attractive way of loading tax onto the rich because the higher priced goods would be either positional goods or status goods. Positional goods, as originally defined by Fred Hirsch, are those which only the better-off can afford to buy --diamonds, Impressionist paintings and grand houses, etc -- that is, those goods that are rare and always will be in short supply and which therefore carry high social status. A high rate of tax, while it would not be welcomed, would certainly add to the social satisfaction of being able to afford them because lesser folk would be excluded.
Status goods as I define them -- that is, goods which are high-priced to start with but which are subsequently capable of being mass produced so that they become steadily cheaper over time -- can also be highly taxed, though not so highly as positional goods, I suggest.
As a rough stab I would suggest that a sales tax could be in five bands. The topmost band would carry a high percentage tax in the case of positional goods -- those that automatically carry a high price tab anyway. The second band would be for status goods when they first appear. In the case of a brand-new product, the manufacturer can simply be asked what classification he wishes to place it in. There would be no cheating because the percentage tax applied would shift the good firmly one way or the another. This would also obviate what is a corrupt practice on the part of those manufacturers of high-priced branded goods who want the best of both worlds -- who want to make it seem as if they are producing exclusive goods (positional goods) but yet quietly enlarge their markets and produce quite high quantities. In practice, such attempts at false positional goods only encourages counterfeit goods which, in due course, devalues the original good.
The third band could be applied to every type of status good as it is adjudged to reach a halfway level (precisely what this may ultimately tuirn out to be doesn't really matter), The fourth band would be for all status goods that have finally become ordinary consumer goods bought by almost everybody. The fifth band would be zero-rated -- reserved for items like food, children's clothing, health products, information, and educational goods and services.
The present sort of tax system is a mild sort of ideological attempt to approximate to equality before a consumer has the chance of buying anything. Such a taxation system never succeeds in doing so because of corruption but if it were to achieve equality then there would be no economic growth at all because innovations, necessarily costly to produce at first, could never be afforded by anyone. In fact, it is inequality that drives the economic system. It is the demand for high-priced status goods by the highly-paid which encourages more manufacturers to appear in the market place with the result that the price becomes cheaper and more consumers can buy them. We need reasonable inequality, though not the enhanced sort which is produced by 'progressive' taxation.
A sales-tax would also catch criminals who, at present, largely evade the system. I recently heard a senior commissioner at Scotland Yard who said that the police know of about 200 master criminals in England who live in grand houses and drive expensive cars but have no evidence of how they obtain their riches. A sales tax on the properties and goods they buy would at least give the police at least the beginnings of an audit trail which gives them more chance than they have now of following through to the source of their wealth.
I recently came across an article of six years ago by Hamish McRae, the economic editor of the Independent in which he argues very persuasively for a 'location tax' on the grounds that we are all becoming more mobile and more able to evade taxes which are mainly based on fixed employment. However mobile we may become, we still want a place that we call home. He writes at the end of the article of the need for "a bedrock of taxation which will remain" which includes "a reasonable level of sales taxes; fuel and power taxation; and some (maybe quite modest) level of income tax." However, all of these, except the last one, would be subsumed in my proposal of a five (or so)-banded sales tax. I simply see no reason at all for income tax. I think it has been a blind alley which has been in no-one's interests -- governments or the governed -- but very much in the interests of the cheat and the criminal.
Keith Hudson
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