Economic theory predicts that taxes on labor and capital discourage production (and productivity growth) and thus economic growth. Thus, it would make more sense to tax things such as consumption and property. Indeed, empirical research confirms these findings. According to a paper by the Organization for Economic Co-Operation and Development: Property taxes, and particularly recurrent taxes on immovable property, seem to be the most growth-friendly, followed by consumption taxes and then by personal income taxes. Corporate income taxes appear to have the most negative effect on GDP per capita. These findings suggest that a revenue-neutral growth-oriented tax reform would be to shift part of the revenue base towards recurrent property and consumption taxes and away from income taxes, especially corporate taxes. There is also evidence of a negative relationship between the progressivity of personal income taxes and growth. [1] I am personally a fan of replacing federal income, corporate, and payroll taxes with a single progressive consumption tax, such as the Fair Tax. Estimates find that such reforms would boost investment, economic growth, and real wages in the United States. [2] What do you think of tax reform? Citations: [1] ecn.ulaval.ca/~sgor/cit/arnold_oecd_2008/arnold_oecd_2008.pdf [2] 162.144.59.223/~fairtaxorg/wp-content/uploads/2014/07/SummaryOfTheFairTaxOnTheEconomy.pdf [3]
Posted on: Thu, 18 Sep 2014 02:00:01 +0000
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