March 3, 2005

Me and the Maestro

(And even Silence I believe....) are fans of consumption based taxation. It offers privacy, simplicity, facilitates collection even from black and grey market activities, and it encourages savings and investment instead of discouraging production.

Fed Chief Greenspan likes it.

In his prepared remarks to the panel, the Fed chief said that "a consumption tax would be best from the perspective of promoting economic growth" because it would encourage saving and the capital formation that the economy needs to expand and modernize.

"However, getting from the current tax system to a consumption tax raises a challenging set of transition issues," he added.

Greenspan also said he supported tax incentives to encourage savings, despite what he called conflicting evidence about the incentives' success at increasing the national savings rate, because they enhance individuals' retirement accounts.

The Maestro and I differ, however, in that he calls for a hybrid sales and income tax -- specifically to allow the Democrats to continue social engineering. He will pay that political price to move onto a new system.

Larry Kudlow and I are concerned that we will end up with both an income tax and a sales tax, which would really provide the worst of each. Drive a hybrid car, but be cautious of a hybrid tax.

Economics and Markets Posted by John Kranz at March 3, 2005 1:20 PM

Speaking of hybrid tax, I understand California is now contemplating a use tax for autos based on miles driven. Seems that hybrid and high mileage autos have been so popular in the state that the gas tax revenues are falling short. Maybe we can send John Galt out there on a road trip in the truck to replenish the coffers?

Posted by: Silence Dogood at March 4, 2005 7:27 PM

I ma surprised that the gas demand is that elastic. Not doubting you, just suspect that any new tax opportunity looks good to California legislators.

Posted by: jk at March 5, 2005 1:32 PM | What do you think? [2]