Sin Taxes Again

Tyler Cowan provides a link to a good Paper, but if you are like me, just read his assessment. The passage listed fairly states the gains from moderate Inflation. It does not address the problem of chronic moderate inflation. Here is where the matrix changes to my mind. Chronic moderate inflation changes the Players’ reaction to the inflation. Older Households are trapped within the mix, and face a definite reduction of their collective wealth over time, thereby lowering the value of their past labor–a post-Wage Cut which they cannot assail; a simple 2% inflation rate per year will bring a halving of wealth (with Interest rates below 5%, and normal Withdrawals for Household Expenditures) in about 14 years. Young Middle Class Incomes will find no gain from chronic inflation, after Lenders adjust for the estimated chronic rate of Inflation. Foreigners will adjust their Purchase decisions to account for chronic inflation, after yearly reviews of their Investment protocols.

The real element in this argument states that chronic inflation remains a vehicle to discount Wages paid to Labor. The traditional weapon to fight inflation has always been tight Credit extension, but it works poorly at best. This is because Credit extension, in itself, serves as only a minor Propellent of inflation. The real drive of inflation is excessive Consumption. Do not assume this stands as an advocacy of some ideal Savings rate. It is not! This tract advocates direct use of taxation to limit both Credit extension and Consumption. There are methods to achieve such restrictions with effective, enforceable Tax forms. It may be time for implementation of such mechanisms.

Maximum Consumption levels can be established for every Income level, which match Economic evaluation of sound Purchasing practice, with an automatic Surtax on determined excess Consumption beyond this limit; the Surtax set at a level to naturally reduce Consumption to the acceptable limit of Consumption. Sound like Big Brother Economics? Most definitely! Why advocate such a course?

It would force Income Earners to Save and Invest for their retirement, or face additional taxation. It would reduce the total Consumption level of all American Consumers, and do this in a highly efficient manner; Consumers would rationally plan for such Consumption for which there is real Desire or Need, reducing the impact of Impulse-Buying. The Financial markets would adjust their Interest rates to reflect the new matrix, with lowered Interest rates both in borrowing funds and loan extension. It would compel Producers to extend the life-expectancy of their Products, in order to attract more Buyers. The total would lead to higher rates of Capital accumulation among American Households, a better mix of Consumption Products, a more stable Financial market, and reduce the pressures of an Ageing Labor force. lgl