Sunday, October 2, 2011

Compulsory spending for the rich?

Why tax the rich on their income?  Let's force them to spend their wealth instead.

Taxing the rich cannot solve our deficit problems, and it will take discretionary spending dollars out of the hands of those individuals most likely to spend in the first place.  Instead we should compel the wealthiest individuals to increase their discretionary spending, boosting the economy and ultimately creating more GDP for taxation.

Offer a future year tax credit for excess consumption in the current year.  Or create limited current year deductions for luxury spending.  Or tax credits for large ticket luxury purchases like private jets.  Or for spending invested wealth directly on consumption.  Anything to push well off individuals to spend a little more.  You could go so far as basing this spending requirement on accumulated wealth instead of current year income.

Compulsory consumption would be similar to taxation and stimulus except the decision making power remains with the individual (except the decision to spend at all).  Unlike taxation, affected individuals would be free to choose products and services most beneficial and enjoyable to them.  And since spending would be driven by choice, stimulus would be applied to a diverse array of sectors all at once.

Rational wealthy individuals will buy products and services that cater to their tastes, which limits the stimulus effect to those businesses.  But in turn they will pay employees, invest and create jobs, and buy products and services from other businesses.  Top earners for those companies would be compelled to spend as well, creating additional spending throughout more of the economy.

This is the same effect provided by tax cuts or direct credits to individuals, except the government does not have to actually pay for it with debt or reduced spending.

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