I see what you're saying -- money isn't useful until it's spent. But I think the argument is that a wealthy person doesn't put that extra 98% of their money under a mattress, they invest it. Now they have passive income on top of their previous income, and their effective tax rate from sales tax is even lower. Until eventually they have so much well that they don't have to work at all, and neither do their descendants, and you have an aristocracy.
randomdata|5 years ago
But, if such a system was in place, the money would be taxed during the purchase of the investment vehicle. A sale is a sale. Unless the money is literally stuck in a mattress, it is going to be taxed upon doing anything useful with it. If it is simply stuck in a mattress for all of eternity, one is really no further ahead. Money only has value when you can use it to facilitate a sale; and when there is a sale there would be a tax.