>This doesn't quite work.
>The implication of this
>example is that the consumption tax rate is
>11 percent. Note that if you start with
>a million, you can't spend it all on
>consumption because you won't have anything
>left for the tax. Your consumption plus
>11 percent of it must be less than the
>million, or X plus 11 percent of X.
>X can be no more than $901K. Therefore
>you can't pay $60K in tax and 'save' $50K.
>You can only have saved $41K. . . .
$41 should be $39, so $901 +60 + 39 = 1000. Otherwise the argument holds. (I had a feeling the rounding error was coming out too large.) Forget my teacher's credo: always work out numerical examples before putting them on the blackboard.
MBS