Thursday, June 05, 2008

Landsburg on Tax Policy

Steve in the WSJ:

Like philanthropy, saving is an act of self-denial that enriches your neighbors (by leaving more goods available for them to consume). But unlike philanthropy, saving is punished by the tax system (via the taxes on interest, dividends, capital gains and inheritance). That's nuts. When you tax saving, you encourage people – wealthy people in particular – to spend more and grab a larger share of the consumption pie. "More consumption by the rich" should not be among the primary objectives of the tax code.

The alternative is to tax can easily implement a consumption tax with a Form 1040 that says: "How much did you earn this year? How much did you save? Now pay tax on the difference." And you can make that tax as progressive as you like.