Taxing trade creates less redistribution than taxing wealth

Taxing trade (activity) creates less redistribution than taxing wealth (assets) where "redistribution" is understood to mean acting to reduce inequalities in the distribution of wealth.

http://www.thefreedictionary.com/redistribution
re·dis·tri·bu·tion (rds-tr-byshn)
n.
1. The act or process of redistributing.
2. An economic theory or policy that advocates reducing inequalities in the distribution of wealth.


A pie chart showing the projected constituents of UK taxation receipts for the tax year 2008-2009, according to the 2008 Budget. 18th Feb'09

It is interesting to note the proportion of taxes that are raised through a levy on trade as opposed to a levy on wealth...

Fully 85% of UK taxes are sourced by taxing the trading behaviour of participants in the market-place. The remainder are (sourced from) the direct taxation of wealth, the most prominent form of which being the Council Tax which comprises not even 5% of the total (using figures for 2008/09).




Fees assigned to "taxing trade" comprising 85.5% of the Total

Income tax	28.65%
National insurance	19.33%
Value added tax	15.49%
Corporation tax	9.48%
Fuel duties	4.75%
Stamp duties	2.49%
Tobacco duties	1.40%
Beer and cider duties	0.63%
Wine duties	0.54%
Customs duties and levies	0.46%
Insurance premium tax	0.44%
Spirits duties	0.43%
Air passenger duty	0.39%
Petroleum revenue tax	0.31%
Betting and gaming duties	0.28%
Landfill tax	0.20%
Climate change levy	0.13%
Aggregates levy	0.07%

Fees assigned to "taxing wealth" comprising 10.1% of the Total

Council tax	4.60%
Business rates	4.38%
Vehicle excise duties	1.13%

Fees unassigned comprising 4.4% of the Total

Other taxes and royalties	2.90%
Capital gains tax	0.92%
Inheritance tax	0.59%

Tax on wealth (as opposed to tax on trade) tends to encourage equality because the "poor" are just as inclined to trade as the "rich". There are certain basic requirements, such as the need for food and energy which are consumed in roughly equal amounts by both groups. In fact, someone who has little money might be more inclined to trade (sell their labour) because this is a way to acquire wealth, to catch up. Someone without valuable assets such as a house would perhaps work harder than someone who has sufficient housing... the rich can afford to be more idle.

Taxing trade tends to re-enforce the status quo, whereas taxing wealth enables a more speedy redistribution of wealth.


If the Government can be seen as landlord to its citizens they you pay according to what proportion of the natural assets of the State that you occupy (an example might be the Land Value Tax). If on the other hand you pay the State according to how much "work" you do (as measured in transactions) then the Government will then be seen as a "dependent" to the people, like a parasite...

We are punished for working together and helping one-another. It would be better to tax anti-social behaviour such as pollution, or perhaps owning more than a fair shore of the natural resources such as a landlord.

18th February 2009