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Investments made by the rich have less social benefit than consumption. Consumption is, after all, the point of it all. Taxing utility and not non-utility is a great way to have a society where assets are employed in the least useful way possible.

Consumption is central because it is information. It is how capitalism works: the choices made by consumers tell capital what to invest in. Unfortunately, inequality causes that relationship to break down and the economy starts making things that maximize utility of those with money instead of general utility. Combine that with the effectiveness of rent-seeking, and you get the current mess where finance trumps everything because it provides the most value to capital, rather than because it contributes the most value.

Tax regimes that most benefit economic growth shore up market failures: externalities, public goods, investment in education, infrastructure and the like. That's not controversial except in the libertarian fringes. However, I believe they also serve equality, so that we can get a little closer to maximizing utility instead of profit (which is, by definition, a sign of a poorly functioning market.)




Consumption has less external benefit than investment. Due to scale effects and diminishing marginal utility, consumption by the poor wins over consumption by the rich, and investment by the poor (i.e. a founder investing $10k into his own company) is more useful than investment by the rich (taking Apple's market cap from $500b to $500000010000). There are sound economic arguments for each.

I don't know if there's an economic argument for consumption by the poor being more economically efficient than investment by the rich, or for consumption > investment in general.


Investment is planning for future consumption. Taxing one affects the other. In tax incidence, there's no free lunch.

The point is to tax in a way that's most useful. There's no point in progressively and compound-ly taxing people for having large investments. There is a point to progressively taxing people who consume many times more than average.




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