Alejandro Belluscio (baldusi@hotmail.com) on 2/12/03 wrote:
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First
>is that with revenue taxes you incentivate the vertical integration (a bad thing,
>since usually different stages of production have natural monopolies, thus you make
>the whole market go to monopolies). It has the problem

So revenue tax would be good for a company like IBM ;-)

>that's difficult to decide when something is a final sell and not an input for something else. But you can't
>have VAT at the state level because you'd have to have a way fo deducting taxes
>payed to other states. Which is a bit difficult politically.

Here in the U.S. sales tax works at the state level and there are no political problems with it.

>>I assume customs tax is tariffs right?
>Tariffs is a kind of custom tax. But yes, those are bad too. But since usually
>the Europeans imperiums based their taxation systems on them it's still widely used.
>That and the fact that certain companies are more than willing to pay^H^H^H lobby for them.

Interesting, since China has recently imposed a high percentage tariff/duty/customs tax on imports of ICs to grow its young chip fab sector and give it a robust manufacturing ability. Some analysts thought this would be good for China in the long term as it would help its domestic chip producers.

Countries like the U.S. had high import tariffs in the 19th century to help its 'in-house' manufacturing industries which were backward at the time, and this was a large part of the cause of the War Between the States here. Now that our industries are world leading we drop tariffs and advocate that other countries do the same.

One other tidbit: we were a 'pirate' nation for over a century that did not respect the copyrights and patents of other countries ;)

>>What do you mean by saying that income tax is very efficient / 'incentive of economy intact'?
>Well, the only non distorsive tax is the lump sum tax (i.e. everybody has to pay
>$x(i) to the government).

Can this x() function vary by income? And if so would it still be non-distortive? Or is the only non-distortive tax the transfer of an absolute amount of money / lump sum from each individual to the treasury? Would this even apply to babies as counting them out would perhaps be distortive?

>Technically you could have a different
>amount pay by different people, but then how do you decide how much has each to
>pay without making it dependant on anything (like income, age, spending, wealth
>and such) and still being fair? It seems that's impossible to be fair and efficient
>at the same time (Amaytha Sen got a Nobel Prize for just saying that). So you have
>to get to the second best: VAT and Income tax. VAT is a bit more efficient because
>it's orthogonal to the investment decition, while Income it's not (compare profits
>vs. profits after taxes and may be you decide not to invest becuse of the taxes).
>But it's also considered more regressive because poor people tend to spend most
>of it's wealth while rich has most of it on investments. So you end up taxing more
>heavily the poor than the rich. Or you spend more the spenders than the savers,
>which might be good for an economy like the American (a bit saving averse). So in
>the end it's usually considered that a mix of both taxes is a good compromise between efficiency and fairness.

What about taking a page from income tax methods and having only sales tax (which would be best/most efficient) while giving the poor a 'rebate' check say every week from the treasury? This would be fair to the poor, and even some basic things would have no sales tax like water and milk and bread to help them out even further. What of this?

Sincerely,