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The absolute worst type of tax is an income tax because, in effect, it's a tax on people for working, producing and investing, based not on what they take out of an economy, but what they put into it. The problem with this is twofold: Firstly, taxes levied against a particular behavior end up discouraging that behavior, in this case, working, producing and investing. Secondly, because an income tax makes no distinction between, for example, income used to buy luxury goods and income saved and invested in starting or growing a business, it naturally reduces the amount of money which is available to be invested. The best alternative is to tax people based on what they spend, in the form of sales taxes which are levied against goods that individuals consume. Not only is this better for an economy, it's easy to implement because businesses - who already keep records - can simply pass on the cost directly to consumers.
Economist, investment advisor, author and commentator, Peter Schiff
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