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Keegs's avatar

Someone just happened to link to this: I think it's a strange article. You could flip the whole thing by noting that an income tax applies the same rate regardless of when you receive the income. There's this built-in assumption that neutrality with regard to consumption is a relevant tax principle, but that's not clear at all. It's much more clear to me that neutrality with regard to income is important.

Also, you make an accounting mistake by ignoring the paradox of thrift. People choosing to save less does not reduce total savings. Though if you taxed the savings of households and not companies, that would shift savings towards companies of course. More consumption also means a higher return on investment, leading to more investment instead of less. I'm sure you could construct some complex argument that goes against this, but it's not at all as straightforward as you put it.

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