Wouldn a consumption tax, which reduces consumer spending, be a drag on economic growth?
The tax should be phased in gradually after the economy recovers. The capital market would direct consumers’ extra savings to investors, who would spend the money on capital goods. So total spending would remain the same – and it’s total spending that determines output and employment. You’ve said that executive pay in America is too high, but you also think pay caps are a bad idea. Why? The jobs that are the most important, that create the most value, end up paying more. You need [salary] bidding wars to help identify the best people and steer them to the right places. What’s not true is that they need big salaries to be willing to work hard. There’s no evidence for that. If the differences in their post-tax pay were just a tiny fraction of what we see pretax, everything would work just about as well. So the simplest remedy would be to raise the tax on those high salaries. But you argue that this logic doesn’t apply as well to the financial industry, right? In the case of, say, the sof
