'WHAT--READ A TAX ARTICLE?'

Congratulations on your article, "Trends in Taxation" (February 2000). You even got me to read a tax article! The ideas are fascinating.

An additional point for consideration: ad valorem taxes (e.g., on real estate or personal property) are based on the idea that value resides in tangible assets. Increasingly, value resides in intangible assets (especially knowledge assets). One of the most ludicrous images I can imagine is Bill Gates passing through Customs announcing "nothing to declare." However, it's very difficult to tax knowledge assets because 1) they're intangible and 2) we have no decent measures of them. They are most certainly not "worth" whatever they cost to create (i.e., cost or amortized cost is not a sound measure of value). However, ultimately, the only way these intangible values can be realized is by selling something--a product or service that contains the intangible. And the transaction taxes you describe would kick in at that point. Thus, a transaction tax like the WTX is indifferent between an industrial or a postindustrial economy--a huge advantage.

A big issue is how the tax systems of different countries interface. If the United States went for the WTX but its key trading partners didn't, what distortions would be introduced into global trade? *

Robert K. Elliott, CPA KPMG LLP

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