[nickff]

Why would you reward purchasing consumption goods more than investing in long term growth? Sales tax is generally applied to consumer purchases, whereas the wealthy currently allocate much of their money to investing in businesses, which presumably use this cash to finance capital expenditures, or scaling already productive businesses.

Should we not give those who invest in the economy, and presumably in job creation preferential treatment over those who purchase yachts, airplanes, race cars, and other consumption goods?

[tthomas48]

Because consumption drives the economy at its most basic level. You can have the rich invest in companies they like or you can have consumers "invest" in companies they like through consumption. Clearly the consumers are going to be a more accurate reflection of what the market wants, and the long term viability of the company. Investment from the wealthy is indicative of what a tiny number of lucky people want. And many companies have billions of dollars they're sitting on, so clearly the market does not allocate dollars in the most efficient way possible.

Basically sales tax is the best way to know that your dollar is doing something of value.

[nickff]

In earlier times, I might have agreed with you.

If you look at the systems which recent advances have allowed humans to produce, you can easily see that the most valuable and desirable goods require highly integrated sub-assemblies and components, and the end products have high part counts. Your cellphone or computer alone is made up of hundreds or thousands of components, each requiring highly complex R&D and production, your car has 10k parts, an airplane 500k parts, and a space shuttle has 2000k parts. As a result, creating modern goods requires an ever-increasing number of 'steps', which in turn requires ever-increasing capital investment in R&D and production. We should be encouraging this investment if we want to continue to make more advanced and complex products available to everyone (including consumers).

[tthomas48]

Sure, I was trying to create a simplistic system here though. Clearly if we spent years we might come up with something sort of elegant and sort of fair, just like our tax code.

The point is it's easier to figure out what you're contributing to the economy via sales tax than it is via investment. It's difficult to tell the difference between the guy who has invested $2 billion in 10,000 different startups, and the guy who is generating no revenue sitting on $2 billion in non-productive land in the middle of nowhere. Clearly we don't want to tax investment in startups just so we can see who's investing.

[jack-r-abbit]

No. Everyone that makes more money than me is evil and I must make it my life's mission to make sure their success is rewarded with a larger share of the tax burden. /s

[gopher1]

This tax-for-votes scheme aside, one of the big problems with the American economy at the moment is that much of the investments that businesses are making are to IT staffing firms in Bangalore, and manufacturing companies in Shenzhen. We need the tax system to promote local investment and jobs creation.