In the NY Times, Michael Graetz describes a plan for tax simplification that eliminates any income taxes on earnings below $100,000: a value added tax (‘VAT’) of 14% would make up the revenue shortfall. One supposed advantage of a VAT is that it would shift money from consumption to savings. Every night, I turn on the television, and I am told that consumer spending is keeping the economy afloat. Now we want to limit consumer spending?
The Mad Biologist is very confused…
An aside: the savings argument put forth assumes that most people want to increase their savings at the cost of lowering their consumption. I hate to tell you, Mr. Economist, many “folks” want their plasma screens (and their porn). Leaving the ‘people-want-stuff’ argument aside, many people can’t build up savings even if they wanted to: case in point, The Mad Biologist. When I lived in Connecticut, where my rent was ~40% lower, and the sales tax was 4%, not 8.75%, I saved ~10% of my income (granted 10% of next to nothing is next to nothing, but it’s the thought that counts). Now that I live in suburban Long Island, I don’t save nearly as much.
I’ll start a new paragraph just so you don’t miss the point: if we want to do something meaningful about savings, lower rents and increase wages. Got it?
Or like my Uncle Harry used to say, “Rich or poor, it’s always good to have money.”