One thing I would add, we need to treat the questions of “what are the trade-offs” and “what is efficient” with the first brush, then armed with that knowledge we can add subjective stuff on what trade-offs we are willing to make given our view of what some sort of “implicit social welfare function” looks like.  When having these discussions lets try to make these issues clear, so we can discuss them transparently 😉

 I guess the question then is, how do we value this peace-of-mind for tax purposes?  And should we also be taxing people for having an education, having a supportive family, having good looks?  These things also contribute to security and peace-of-mind.

In any case, I would have thought this insurance value would be substantially less than the goods and services that could be bought with the face value of the savings.  Bearing in mind that each additional dollar of savings has less and less utility as insurance for mishaps.  15% (i.e. the rate of GST) of 1% is not a big number. 

I dont understand the second part of your response but it sounds very subjective. 

What utility does person A(snr) get from their savings if they don’t spend them?  (Bearing in mind that any income generated from these savings will be taxed).

On overseas travel, it is not obvious how to even measure progressivity, since going overseas avoids domestic sales taxes but then incurs foreign taxes. Frankly, I think Rob is clutching at straws on this one.

On bequests. You ate absolutely right Consider the following reductio Most of my income is spent on my children. In effect, I give the money to them. As a result I avoid GST but not income tax. They incur the GST but not the income tax. If poor people spend a greater percentage of their income on children than do rich people (which I suspect is true) does this make the GST progressive?

It is true that construction of a new house attracts GST, but if you look around, say, all the expensive houses in places like Kelburn or Parnell or Cashmere owned mainly by high income folk, you will see they are usually old houses, built long before the advent of GST. The land value of even new homes is also GST free in most cases, I believe, although I am happy to be corrected on that point. More importantly, you note that costs of home ownership do not rise proportionally with income through the deciles, taking this as evidence of GST progressivity. That may be true if your baseline for measuring progressivity is total expenditure, but it is not necessarily true if the baseline is income (which, for reasons I state in the book, is my preferred baseline). If the money that high-income folk are no longer spending on mortgages etc (possibly because they have paid the mortage off, for example) is saved rather than spent on other G+S in the current period, then it contributes to GST regressivity, in period 1 at least. More on that in a moment.
Agreed.
I think it is drawing a pretty long bow to say that GST is neutral with respect to lifetime net savers person A because any lifetime savings of person A will attract GST when spent by person A(jnr), after person A has died. Do you really believe that person A experiences the disutility of being taxed from beyond the grave when person A(jnr) buys something? Or that people feel today the full disutility of taxes their descendants may pay many years or decades into the future?

In the same section of the book that we are discussing (p36 for anyone reading along at home), I set out my reasons for preferring current period exposure to GST over lifetime exposure as a measure of the tax’s progressivity. I would be interested in your take on my reasoning there, too.