[quote]IMHO, we need to discourage gambling and encourage work. That’s why I would lower the rate on **earned** income, and tax investment income at a much higher rate, with steeply progressive rates.
I would not support a consumption tax, because it’s too regressive. Most poor people spend almost all of their income on basic necessities, while the rich can invest theirs. It would be totally immoral and unethical to tax gamblers at 0-15%, while taxing poor people at the maximum rate (if consumption tax is the highest tax).[/quote]
Agreed. VAT only makes sense if you exempt basic necessities, or compensate with a generous tax refund (say, 10% for every dollar earned up to median household income).
Instead I’d suggest that we eliminate mortgage tax deduction, tax all capital gains as income, raise the estate tax to 50% on every dollar above $500,000, close all loopholes and subsidies in corporate tax code, and lower income tax brackets to make the system revenue-neutral.
[quote]We should encourage saving, so people can make intelligent decisions about investment in the future. [/quote]
I’m not so sure that we should encourage saving. Sometimes too much private saving is a bad thing. (Like right now, for example.) And we certainly shouldn’t do it by lowering taxes on capital gains. All it does is inflate P/E ratios of the stock market, with no tangible benefits for the overall economy.
But we should encourage labor vs. passive investment. It would make sense for the top income tax rate to be equal or lower than the capital gains rate.
