Friday, July 19, 2019
Just Taxation :: essays research papers
Index: I.     Introduction     2 II.     Introducing the problem     2 III.     Income vs. Consumption Tax     3 IV.     A just tax base?     5 V.     Liberutopia     6 VI.     Conclusion     8 VII.     References     9 Table of Figures: Figure 1: Consumption vs. income tax     3 Figure 2: Floating money and deposit money     4 I.     Introduction In the debate of just taxation an argument came up, which insisted that any tax that distorts individual preferences should be considered as unjust. This argument is known as the â€Å"fairness-to- savers-argument†. The intention of this essay is to explain of what the fairness to savers argument consists, how to approach it and foremost why it is wrong. At first I will therefore explain the argument on the basis of it’s most common example. The following chapter will then provide a better insight into to exact circumstances, under which the fairness to savers argument might arise. Here the functionalities of the, in the example presented, tax bases will be addressed. To approach the rejection of the argument correctly, it will be necessary to determine what exactly â€Å"just†means and this will lead us to some assumption, which need to be made to prove the argument wrong. But before that, I will present the approach Murphy and Nagel make in their book â€Å"The myth of ownership†and why they are not able to reject the argument completely. Afterwards I will introduce my approach, which basically will show, that any kind of taxation will distort individual preferences and there from I derive, that the fairness to savers argu-ment must be invalid. II.     Introducing the problem The basic problem of the fairness to savers argument, is the effect of different tax bases on individual preferences. The name of the argument follows from it’s most vivid example, which I want to address at first, for a better understanding of the issue. The example is often illustrated with the comparison between two individuals preference for saving, both taxed once under an income tax and once under a consumption tax. Let’s consider two people, Steve and John, both earn in t0 100$, the rate of return is in every period constantly at 10% and they are in every aspect totally similar, despite their individual time preference, which is for Steve at 3% and for John at 9%. That means exactly, that Steve is willing to save his money as long he gets at least a net return rate of 3% and John is willing to save his money as long he gets at least a net return rate of 9%. In case their time preference is higher than the net return rate, the utility they derive from immediate co nsumption will be greater than the utility they derive from saving, thus they won’t save their money.
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