Well, when working on my PRI Flat Tax pamphlet [.pdf], I realized Rothbard and I were wrong. An income tax really does distort the consumption/saving decision, moving it away from the margin that the consumer would have chosen in the absence of taxes. In other words, the consumption tax makes the consumer poorer, to be sure, but at least the consumer gets to decide in which time period to distribute the blow. But an income tax is a double whammy–it takes away from your overall budget, but then puts on extra penalty on your decision to carry income forward.Say what? Rothbard's view is not that the consumption tax makes consumers poorer, but that the tax is shifted backward to land and labor. Thus, there is nothing in Rothbard's view about a consumer deciding " in which time period to distribute the blow." There is no blow to the consumer.
Friday, October 21, 2011
Murphy Atttacks Rothbard on His Consumption Tax View
Bob Murphy has decided to enter the 'consumption tax' versus 'income tax' fray and points to an article where he writes Rothbard is wrong about the consumption tax: