Comment by mothballed 3 days ago
Tariffs also make sense, since all that stuff is going through and declared to customs anyway, although it might be an economically inferior mechanism.
Either way the income tax is one of the most dystopian ways to collect tax as it pretty much relies on mass surveillance of domestic activities to be implemented fairly or effectively.
> Neoclassical economics recognizes, under the standard macro model, that labor taxation is second best. The first-best is capital taxation, once and for all time
Tariffs (or, more generically, consumption taxes) are effectively both. If something is sold, the money is going to some combination of labor and capital, and then the tax is paid either way. Tariffs in particular also create a preference for domestic production, which increases domestic labor demand at the cost of lower economic efficiency and higher prices, which is the primary thing that makes them dumb if you're not a fan of taking that trade off.
In theory the primary disadvantage to consumption taxes is that unless you want to track all of everyone's consumption, it's hard to apply a progressive rate structure. But in practice there is a way to do that -- provide a universal tax credit in a fixed amount. Then everyone pays a uniform marginal rate, lower income people receive e.g. a $10,000 credit and pay $5000 in taxes (which also obviates the need for $5000 in social assistance programs), and middle and upper income people get the same $10,000 credit but pay more in tax.
I'm talking about from a practical perspective including respecting domestic privacy, not theoretical bests.
It is difficult to determine the value of a particular piece of land, particularly if it hasn't been sold for a long time and won't anytime soon.
International trade can much easier be priced, and there is no (additional) privacy concern because it all has to be declared anyway.
Indeed, but funding the level of government the constitution authorizes, which shouldn't cost more than a couple percent of GDP, their dumb-ness isn't enough to greatly distort the market and meanwhile there is very little additional overhead or intrusion vs other methods of taxation.
Neoclassical economics recognizes, under the standard macro model, that labor taxation is second best. The first-best is capital taxation, once and for all time, but due to time inconsistency (nothing prevents a government from taxing again in the future) it fails to be useful outside of theory. There is some squishiness once you consider overlapping generations model, arguably more realistic than infinitely lived agents (which I always felt represent companies or familial dynasties more than real people).
Land value taxation is different because there is no meaningful growth or loss of the capital stock.