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The only way to pay the government's ballooning bills and reduce the budget deficit during an economic downturn is to tax the bejeezus out of the rich. The alternative is to borrow more money, thus making things worse. Realistically, cutting government spending is a worthy goal, but it won't get us where we need to be. So I have a suggestion. It's impractical, of course, but you wouldn't be reading this blog if you didn't enjoy noodling about impractical ideas.

Suppose the government passes a law requiring all relatively wealthy people, defined in some practical way, to buy extra crap they don't need from local providers. The relatively wealthy could dine out more often, buy some extra shirts, get a flat screen TV for the garage, whatever.

The result would be a stimulus to the economy that would lift all boats and fill the government coffers. The relatively wealthy wouldn't feel so bad about this form of tax because at least they end up with more shirts and flat screen TVs. This is the same principle as the $600 tax rebates, in terms of fiscal stimulus. But it wouldn't increase the deficit.

I know, I know, you will point out that our shirts and TVs are made overseas. But the local merchants get their markups, and that helps.

The best part of this clearly impractical plan is that the rich would have lots of options on how to spend their money. There is a lot of science supporting the idea that having freedom of choice is essential to happiness. I would be happier spending $100 on two shirts I don't need versus paying $50 in taxes and having no control over how it is spent. Everyone wins.

The hard part is figuring out how to measure this "extra" spending compared to the baseline, so you can be sure the relatively wealthy are complying. So perhaps it needs to be voluntary, like recycling.

I can imagine a new sort of credit card that is used only for the "extra" purchases, provided by the usual banks and credit card firms, but with one important feature: Everything you use the card for is public record, on the Internet.

I am convinced that the main reason people comply with recycling is that their neighbors can see who is being a good citizen on trash day. Peer pressure is important.

Obviously you wouldn't use the special credit card for beer and condoms, because the neighbors would be watching, or could be. I think this would induce people to buy harmless additional consumer items, or take extra domestic vacations, or buy extra birthday presents for friends.

Yes, this idea isn't practical. But how are the other plans looking?
 
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Oct 2, 2008
This idea is certainly no more impractical than starting a war to potentially see a lift in manufacturing a la WWII.
 
 
Oct 2, 2008
That's a pretty interesting idea. Even if the rich people were to buy products from their own company, it would result in more money for the retail outlets that sell the products. I find most of your ideas revolve around this idea of essentially getting the rich to give up their money for some sort of compensation that money cannot buy (such as your idea about votes).
Of course, the problem with your idea (and most of your ideas) is simply that your current govt probably would not pass them (whether they are good ideas or not).
 
 
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Oct 2, 2008
P.S. The really wealthy (Sorry Scott, you fit in that category) can't consume enough under your plan to make it work.

The most effective means would be for the wealthy to get really charitable all of a sudden - pick a variety of non-medical causes. It's my experience that most non-profits do a better job of helping people than the government does.
 
 
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Oct 2, 2008
The problem is that's what the relatively wealthy already did...a couple extra houses they didn't need. Now the market crashed and they aren't so relatively wealthy; they're relatively in debt past their eyeballs with most of their long term investments shot even if they're bringing in a larger personal income than most.

The personal credit industry is next as lower and middle class bankruptcies increase from higher priced everything.
 
 
Oct 2, 2008
And if you somehow made all purchases on the special credit card exempt from sales taxes, then that would definitely increase the incentive to buy those extra TVs. If the choice is $100 in knowing what I buy vs. $50 going toward who knows what, but there's an 8% sales tax on the $100 purchase, then that's still $8.00 going toward who knows what.

Or would the sales tax the point of requiring the extra purchases? Either way Oregon wins :)
 
 
Oct 2, 2008
Why not just increase tariffs for luxury goods like expensive cars and jewelry?
 
 
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Oct 2, 2008
Hi Scott,

I like your idea. I do see it increasing factory orders, driving retail sales and providing an economic stimulus. The government should also pick up some increased corporate taxes and we can even get some import tariff revenues if people buy the right things. Perhaps you could publish some list of goods and services that will do the most good. It does sound way more fun than higher tax brackets. Plus, if they buy a lot of crap they do not want, all that could be donated to some type of toys for the not so rich charity.

If you are looking for some ideas I am in the market for a new boat and would not say no if you wanted to but it for me.

Thanks in advance,

dsg
 
 
Oct 2, 2008
Oooo! Can I come over and watch TV in your garage?
 
 
Oct 2, 2008
The rich already have flat screens in the garage. Jeez, where have you been?
 
 
Oct 2, 2008
Rich people already hire assistants to help them buy stuff.

How much more could they possibly buy?

Maybe we could eliminate luxury taxes on things like yachts.
 
 
Oct 2, 2008
So what are you buying, Scott?
 
 
 
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