Haven't read all the posts yet, but I'll add some thoughts:
1. I like the idea of a negative income tax. In fact, I think all welfare (except maybe health care for the chronically ill and elderly, and perhaps other specific things) should be replaced by one. That said, 500,000 is way too high, what the heck? A more reasonable target is something like 10 or 20 thousand, enough to survive on but not so much that you'd choose not to work. Of course this should decrease gradually the more you earn, something like 50 cents per dollar so working more is never disadvantageous.
2. I am not certain income tax should be eliminated entirely, but regardless a progressive tax would make no sense in a negative income tax system, regardless of your thoughts on progressive taxes generally.
3. Taxes cause what is called a deadweight loss in economic terms. I'm not sure how to explain this properly, but taxes essentially decrease the size of the pie for everyone. However, this deadweight loss depends on the elasticity of the good or service being taxed, so a perfectly inelastic good would cause no deadweight loss. One such perfectly inelastic good is the undeveloped price of land, so such a tax should form a large part of any theoretical tax reform. This may have a negative effect on home ownership, but I don't see a problem with that.
4. Similar to the above, there is a concept called a negative externality. This is where the price of a good or service, determined by supply and demand, is different from its actual benefit to society because it causes negative effects that are large for society but are not strongly felt by the buyer and seller. This is related to the tragedy of the commons and the prisoner's dilemma. Some such goods and services include the mentioned pollution (or rather goods and services that cause pollution) as well as recreational drugs and probably other things I'm too tired to think of. Taxes on such things are called Pigovian taxes. Because such taxes can avoid the effects of deadweight losses and even create gains these should be a strong part of the tax system. This could also be extended to luxury items like jewelry or fancy cars, although I don't consider media to be a luxury item but a form of artistic expression, which shouldn't be taxed any more than necessities are.
5. Somewhat related is the concept of a positive externality, where a good or service brings benefit to society beyond the benefit provided to the consumer. This is the rational for subsidies, but I oppose subsidies because they encourage corporate interference in government. Instead, where such positive externalities exist a voucher program, like those proposed for schools, would be a better choice.
6. I don't think a general consumption tax is a good idea, because of the deadweight loss I mentioned earlier. The deadweight loss is less for an income tax than a consumption tax because employment is less elastic than consumer goods. If land and pigovian taxes are not enough, then we should resort to an income tax, not a consumption tax.
7. A poster mentioned taxing consumers vs. taxing producers/sellers. Fact is, it makes no difference. Econ 101 will tell you that whether you tax the buyer or seller of a good or service the transaction ends up identical.
edited 13th Dec '11 12:43:13 AM by Drolyt