The problem is that Landsburg claims to believe that if your consumption spending today does not fall you are not "taxed," and that if your consumption spending today does fall you are "taxed." And that is simply not so--at least, not so in English.
Alex Tabarrok sends us to:
The Rich Man Who Can’t be Taxed: Stevens wants to tax the “idle rich”, her Exhibit A being Robert Kendrick, heir to the $84 million Schlage Lock Company fortune. According to Ms. Stevens, Mr. Kendrick appears to do pretty much nothing but park and re-park his four cars all day long. Taxing people like Mr. Kendrick, she says, has to be part of any solution to America’s fiscal crisis. Here’s what Ms. Stevens misses: Assuming the facts are as she states them, it is quite literally impossible to raise revenue by taxing the likes of Mr. Kendrick. We could argue about whether it’s desirable, but because it’s impossible, the discussion is moot. Here’s why it’s impossible: For the government to consume more goods and services, somebody else must consume fewer. But Mr. Kendrick, by Ms. Stevens’s account, consumes almost no goods or services whatsoever. He just pushes cars around all day. His consumption can’t go much lower.
Alex, too, gets it wrong when he says:
Steve is quite right. The key is this sentence, “For the government to consume more goods and services, somebody else must consume fewer”...
First, there is a full-employment assumption lurking underneath, which may or may not be valid.
Second, we are the government. When the government consumes more goods and services, we consume them. We consume less in our private capacities, but that does not make us "taxed" in the short run even if you identify "taxation" with "lower consumption today" unless you want to identify "taxation" not with "lower consumption today" but with "lowee private consumption today."
Most important, however, is that there are actually not two parties to this situation--Robert Kendrick and the rest of us--but three: Robert Kendrick, the rest of us, and Robert Kendrick's heirs. Looking over time, what happens when we tax Robert Kendrick and use the proceeds to boost government purchases (as opposed to paying down the debt) is:
- The government spends more on consumption and investment goods.
- Robert Kendrick leaves less to his heirs, whoever they happen to be.
- We today consume more government services (and benefit from additional government capital)
- We today consume less in our private capacities.
- We in the future consume more in our private capacities as Robert Kendrick's heirs don't have the money to consume in the future.
It is simply not true that "Robert Kendrick cannot be taxed." Not true at all. No, no, no, no, no.