Mark Thoma has a pretty concise and very accessible op-ed from a couple of days back that’s probably the best simple explanation of tax theory I’ve seen. Read if you’re interested.
He’s also totally correct that there’s no basis for choosing between policies (each has costs and benefits) using a Positive Economic approach. However, Normative Economics looks at just that. If you’re interested in distributional issues the best book I can recommend is Peter J. Lambert’s The Distribution and Redistribution of Income. You’ll have to be able to integrate-by-parts if you want to get most of it, but if you’re interested in understanding distribution and taxation, I don’t think there’s a better comprehensive text out there. Not that I really buy the fundamental premise of Normative Econ, which is that in some sense it is good to transfer wealth from rich to poor, but supposing you do buy that premise (or don’t and are interested in understanding anyway) Lambert’s book is a great resource.
Professor Thoma also exhorts people of all positions to stake out their positions on the matter. Let me start by saying that I’m well aware that an income tax causes less distortion to consumer preference than an equal-yield sales tax. I was going to make some graphs to demonstrate why this is the case*, but I don’t have anything super useful for generating those sorts of things here at home. However, once you factor in just how complicated the scheme of deductions, exemptions, credits and what not I’m not sure that the effect on incentives is as simple as that in the real world.
Which is why I could get behind a VAT or something like the Jane Galt Tax Plan. I don’t like progressivity, because I don’t care about fairness of outcome (only equality of opportunity, but that’s a post for another time), but I’ll accept that a lot of folks, probably the majority, think a progressive tax system is in some sense just. Meaning that it’ll probably exist, and therefore might as well exist in a way I think is acceptable given the available options. This isn’t Libertopia, so it’s important to take workable steps toward attainable goals.
As an aside, and I’ll admit this is pretty weird, I think that it’d be a damn good idea to amend the Constitution such that government tax-take as a percentage of GDP was capped (pick a percentage, I’m gonna go with 4). Ideally this would also include a cap on the federal deficit at something like 2-4% of GDP. This would serve to effectively constrain the size of government as a proportion of the total economy, and would force government to live within its means like everyone else.
Those are all the thoughts I have on taxation at the moment, there may be graphs in the future, BE WARNED!
*Basically if you’re maximizing your utility with respect to a budget constraint an income tax shifts the budget constraint toward the origin, reducing your over all expenditure and dropping you down to a lower indifference curve. However, a sales tax changes the prices of some goods relative to others and depending upon elasticities and all that will shift the end-points of the budget constraint, which causes effects other than just a shift toward the origin.
