I think many of those projected benefits dont properly account for the reduced subjective value of money from the new tax. Yes, money can buy shares and interest, but the value of those is again tied to possible future spending. Whether you take your precentage before or after makes no difference, and in a steady state it would be the same percentage, and it will be a steady state unless you expect savings to grow indefinitely without intention to be spent. It doesnt change the incentives: You still get the same amount of consumption/hour worked at the margin, and the same exchange rate between present and future consumption. And the same ratio of conspicious to normal consumption.
It really will keep money in the country (and act as a de facto tariff and export subsidy). It will penalise spikey spending instead of spikey earning. If by replacing income tax you mean to include capital gains, then it will also increase savings independently of the outside world, but you could just eliminate those in isolation (and/or replace with higher PIT) and get the same effect.
"First, under the current VAT scheme that prevails in many countries, these activities are already taxed and very often at the standard rate. Since the VAT would disappear in a world with a PCT, everything else equal, the poorest households would pay less for them (since they would not pay any tax at all) than what they pay now."
This is not an argument for PCT, but for your particular version of it. You could easily imagine a PCT with a bottom rate equal to the current VAT. Not only you could imagine, but I also think it's more likely to be implemented.
As for your version of PCT, if you want to replace both income tax and VAT, you have no bottom rate and want to preserve revenue you'd need to significantly increase the rate for middle and upper income. Which means your proposal is basically PCT plus cash transfer. I'm in favor of that. But I say this because you combined 2 different things and PCT does not have the property of being better for the poorest, you just combined it with something else that does.
It’s not exactly clear whether the principle “equal pay for equal work” really is “the only universally recognized principle of economic justice.”
If justice is to mean anything I would also include “luck, which is pervasive in economic life (and in life in general), should be shared by all to the extent that everyone enjoys at least a basic level of dignity, security and care”.
This is great. I've been intrigued by the idea of a PCT and agree with it in principle. I do find myself thinking more about how this would change things on the supply side. Surely this would have substantial impacts on luxury goods. And while I agree that in aggregate perhaps the theater and the arts would not see large impacts, the margins may matter here. In the US I'm thinking of community theater organizations, for example. I wonder if a PCT in practice would end up with similar problems of complexity as a PIT, with carveouts and other incentives that end up causing a different package of issues.
I think many of those projected benefits dont properly account for the reduced subjective value of money from the new tax. Yes, money can buy shares and interest, but the value of those is again tied to possible future spending. Whether you take your precentage before or after makes no difference, and in a steady state it would be the same percentage, and it will be a steady state unless you expect savings to grow indefinitely without intention to be spent. It doesnt change the incentives: You still get the same amount of consumption/hour worked at the margin, and the same exchange rate between present and future consumption. And the same ratio of conspicious to normal consumption.
It really will keep money in the country (and act as a de facto tariff and export subsidy). It will penalise spikey spending instead of spikey earning. If by replacing income tax you mean to include capital gains, then it will also increase savings independently of the outside world, but you could just eliminate those in isolation (and/or replace with higher PIT) and get the same effect.
"First, under the current VAT scheme that prevails in many countries, these activities are already taxed and very often at the standard rate. Since the VAT would disappear in a world with a PCT, everything else equal, the poorest households would pay less for them (since they would not pay any tax at all) than what they pay now."
This is not an argument for PCT, but for your particular version of it. You could easily imagine a PCT with a bottom rate equal to the current VAT. Not only you could imagine, but I also think it's more likely to be implemented.
As for your version of PCT, if you want to replace both income tax and VAT, you have no bottom rate and want to preserve revenue you'd need to significantly increase the rate for middle and upper income. Which means your proposal is basically PCT plus cash transfer. I'm in favor of that. But I say this because you combined 2 different things and PCT does not have the property of being better for the poorest, you just combined it with something else that does.
It’s not exactly clear whether the principle “equal pay for equal work” really is “the only universally recognized principle of economic justice.”
If justice is to mean anything I would also include “luck, which is pervasive in economic life (and in life in general), should be shared by all to the extent that everyone enjoys at least a basic level of dignity, security and care”.
This is great. I've been intrigued by the idea of a PCT and agree with it in principle. I do find myself thinking more about how this would change things on the supply side. Surely this would have substantial impacts on luxury goods. And while I agree that in aggregate perhaps the theater and the arts would not see large impacts, the margins may matter here. In the US I'm thinking of community theater organizations, for example. I wonder if a PCT in practice would end up with similar problems of complexity as a PIT, with carveouts and other incentives that end up causing a different package of issues.
You did not address health care spending. Would you include it in PCT or not?