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But taxes also have a disincentive effect on economic behaviour. Taxing either wages or business profits in a slowdown nips recovery in the bud. Taxing capital appreciation realised in asset sales has fewer undesirable disincentives. Also taxing asset values (and the problem was in part an asset bubble). Immovable assets (that is, real state and straight land values) are the only ones that cannot flee in response to a tax, and also responsible for the greater part of the debt bubble in much of the OECD, so taxing them would also be a good thing.

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Carrie (migeru at eurotrib dot com) on Thu Jun 10th, 2010 at 10:13:16 AM EST
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