Optimising Growth: Theorem of Proper Taxation and Why We Should Prefer Consumption Taxes Over Income Taxes

Avraam J. Dectis

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Nov 14, 2019

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A. The Theorem of Proper Taxation

The Theorem of Proper Taxation consists of four assertions:

1) The purpose of national taxation is to control inflation.

2) The only time money causes inflation is when it is spent.

3) Therefore, the only time nationwide taxes should affect is when money is spent.

4) Ergo — consumption taxes are far preferable to income taxes.

B. Every government has an obligation to organise its methods to the maximum advantage of its citizens. Tax policy can affect growth and should be organized to promote the well-being of the citizens.

C. Arguments

1) It can be argued that income tax also reduces inflation by lowering demand. However:

- Income tax deprives the owner of the income of that capital before it is necessary. This may diminish investment as well, as the income earner has less to invest in stocks and bonds.

- Income tax heinously inflicts accountancy on every income earner, not just public corporations, which must account.

- Wholly unnecessary inflictions and deprivations are bad policy.

- Income tax prematurely reduces demand. Economies are cyclical, sometimes too hot, sometimes too cold. When they are too hot, interest rates can be raised. When they are too cold…