My point is that the idle capital held in monetary form does nothing, so I want to disincentivize that to some extent. While I have nothing against that capital being available to an enterprise, they inject it back to the economy through their CapEx, R&D, income for employees, etc...
Potentially a company may also sit in vast piles of idle money (e.g. Apple), the value of the company will take into account the DCF and also the existing liquid reserves. In that case the liquid reserves will be progressively diluted by inflation and again, that's a desired outcome (in my view).
_Thomas Picketty has entered the chat_. History has shown that the rich are able to (easily) outpace inflation, while the poor (read: effectively ~95% of the planet) do not.
So I'm not too sure that is a desirable claim to make here.
UBI by itself is progressive, a simple flat UBI creates a progressive effective rate. You can tweak the numbers to obtain your desired target tax curve; increasing or decreasing UBI, having different VATs for different products. As John Von Neumann said, "with 3 parameters I can draw an elephant and with 4 I can make it wiggle its trunk". There is enough free parameters to make the taxation more or less progressive.
I'm not prescribing those details because I think there should be ample room for fine-tuning. What size government spending should have in an economy and how progressive should a tax system be are questions that different countries have answered differently and you find success and failure all across the spectrum. So I consider it a transversal issue.
My focus is on efficiency, resiliency to abuses/gameability and economic incentives.
My concern under a sales-tax only system is that politicians also like to be seen as aiding employment and a sales-tax only system does not seem as supportive of employment as today's system where employment expenses are offset in part by their tax deductibility. No one goes out and employs someone for $100 to save $20 on taxes (still -$80), but I still employ more people when it costs me $80 than when it costs me $100 to do so. In that regard a VAT is superior to a straight sales-tax.
Long-story short, my bet is:
- Sales tax (VAT)
- Inflation
- UBI
Sales tax is far less gameable as it's linked to concrete economic activity. It also has the benefit of tracking the added value produced by an economy (it has the right properties as a tax). It has a problem though, it's regressive, see last point. Every economic activity should be included (e.g. stocks should have a VAT; you sell stock you collect VAT, you buy stocks, you pay VAT). Some progressiveness may be included by using different VAT rates for different products, to be done judiciously.
Inflation is a fantastic tax, very hard to game as it's quite pervasive and taxes the accumulation of capital so it tends to be distributive, anti-regressive. Cash sitting idle does nothing for the economy so disincentivizing it makes sense. This doesn't mean that inflation has to be high (the usual moderately low and positive that economists aim for may be reasonable), just that inflation should be seen as the taxation mechanism for the accumulation of capital. And we shouldn't reduce it to a single number for the entire economy but understand how inflation is evolving in the different parts of the economy to make sure monetary and fiscal policy are hitting the targets.
UBI, fixes the regressiveness of VAT. UBI is not too different from having a lowest tax-free income bracket or even negative-tax income bracket if you prefer to look at it that way. UBI can also help hit the right inflation rates in consumer products which we have been having great trouble achieving through conventional central bank policies.
I think this mix is far less gameable, tracks better the size of the economy, places the right incentives and disincentives and will survive better the ongoing economic transformations (good luck taxing income when most of the economic output is produced by computers).