5
Sep

A tax penalizing excess

Written on September 5, 2007 by Max Oliva in Development

J.Pozuelo-Monfort, MPA candidate at Columbia University
Jaime PM.jpg
The maintenance of a welfare state requires the accumulation of economic resources from the taxation of wealth, income and purchase and sale of goods and services, applying the principle of redistribution through a taxation regime known as progressive.
The attainment of a society driven by the principles of global justice and equity implies the penalty of excess, in a market economy that operates in a democratic regime that by definition must consider an individual’s freedom of consumption as a function of his purchasing power.
It is not obvious to determine what is and what is not a luxury good or service. Nor is it clear whether an additional taxation on a luxury good or service will diminish its demand. It is necessary to reach a consensus as to what goods or services are considered luxury, to then establish a subset which demand does not decrease significantly with additional taxation. From a point of view of efficiency, it is logic to tax more heavily goods that do not experience big drops in demand when the price increases, so that tax collection increases and consumption does not suffer.
Excess is harmful for society as a whole. Excess does not only manifest in aspects such as pollution or abuse of power. The wealthy have the opportunity and the duty of investing and spending their money ethically. The wealthy should set the standard and become the reference to follow, for a bad spending of money is irresponsible, for a bad administration of money is not admissible in a global society that needs socially responsible investors, that needs consumers that spend efficiently. The penalty of excess is as a result necessary and leads to the gradual increase of development aid in the poor world.
A tax on luxury is not only a way to apply the principle of redistribution between rich and poor countries. It is also a way to redistribute between the rich and the poor within each developing country, a concept of local redistribution that perhaps today does not hold in developing countries with the rigor of the industrialized nations, developing countries with an almost non-existent middle class.
Mi casa es su casa. My world is your world. My actions, my attitudes, are no longer independent from the rest of the surrounding world. They are part of a global mechanism that must turn sustainable.

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