One way of doing a mathematical proof is to assume the opposite of what
you're trying to prove. If you can show that it leads to a logical
contradiction, then you've proven the original statement. If you can't
show a contradiction, then the statement is false. It's called
reductio ad absurdum; reduce to an absurdity.
This isn't done much in political argument. Usually, you try to show
that some action will lead to Horrible Consequences. However, you could
show that doing the exact opposite of the action will not result in
HC.
What brought this up was the suggestion of replacing the income tax
with a "consumption tax", ie a national sales tax. Its proponents
say that we could replace the income tax with a sales tax of 20% - 24%.
The numbers are bogus, of course; the "real"
numbers range from 45% - 100%, depending on assumptions.
The claimed advantage is that it would shift money from consumption to
investment. Now, this seems odd to me; on one hand, you have to sell
what you produce, and on the other hand, there's no shortage of
investment capital floating around.
The big disadvantage, of course, is that if you're poor, you're going to
spend all your money and invest very little if any. If you're rich,
you're going to invest a lot and pay a much lower percentage of your
income in tax. That's why sales taxes are the prime example of
"regressive taxation"; taxes that hit the poor hardest.
The proponents of the "consumption tax" say no problem, we'll just give
a tax rebate to poor people. This has two gaping holes: (1) you have
an enormous job in keeping track of what everybody earns and (2) poor
people don't have any financial reserves (duh!). Saying "you'll get
the money back next April" doesn't help a bit right now.
OK, it's not a good idea. But now let's try reductio. Let's exempt
consumption from taxes and tax only investments. What happens now?
Well, poor people don't pay any tax. Rich people pay a one- time
tax on money they invest; if they take it out and spend it, they don't
pay tax. It'll stimulate the economy; people will buy more stuff.
Instead of every retail establishment in the country keeping track of
the tax, it'll be collected by banks, stockbrokers, and so forth, who
have to do a boatload of paperwork anyway. Interest? Capital gains? Details, details (:-).
The point is, not only is it not absurd, it actually looks better than
the original idea! Poor pay low taxes, check. Rich pay higher taxes,
check. Stimulates consumption, check. Easy to collect, check. Minimum
paperwork, check. No funky rebates, check. "Supply side stimulus"?
No, but I haven't seen a real economist who believes in "supply side
economics" anyway.
Or, we could compromise. Ignore both and just tax income.