Consumption Tax?

[Propertarian]

Those of you who have read my posts will be surprised to discover that I favor decreasing the income tax and savings (e.g. capital gains) taxes in the United States. How can that be the case?

The reason is that I support implementing a highly progressive consumption tax in the Unites States.

Now, the objections to progressive taxation tend to rest on incentive arguments i.e. "If you tax income or invesments too highly, people won't work as much or invest as much."

So, why don't we comprimise and implement a progressive consumption tax, allowing us to reduce the other taxes and reduce inequality?

[canis582]

How do you make it progressive? 5 percent tax on beans and a 30 percent tax on yachts?

[TomCollins]

[ QUOTE ]
How do you make it progressive? 5 percent tax on beans and a 30 percent tax on yachts?

[/ QUOTE ]

Pre-bate the tax of basic costs of living to everyone.

[bobman0330]

Analytically, the difference in the tax base between consumption and income is change in net worth. I would expect that people with the means would shift a fair amount of their money away from consumption purposes into investment. That may or may not be a good thing in itself, but it seems that it would lead to an increase, not a decrease in inequality, particularly since investments would now grow tax-free.

[Copernicus]

[ QUOTE ]
Those of you who have read my posts will be surprised to discover that I favor decreasing the income tax and savings (e.g. capital gains) taxes in the United States. How can that be the case?

The reason is that I support implementing a highly progressive consumption tax in the Unites States.

Now, the objections to progressive taxation tend to rest on incentive arguments i.e. "If you tax income or invesments too highly, people won't work as much or invest as much."

So, why don't we comprimise and implement a progressive consumption tax, allowing us to reduce the other taxes and reduce inequality?

[/ QUOTE ]

There are a few problems with the concept:

1. Making it even as progressive as the current income tax system would be difficult.

2. It creates disincentives to consumption, which also stifles investment.

3. Flat tax proposals needed to be modified to continue incentives for home ownership to have any hope of succeeding without presenting severe problems for the economy. A consumption tax that somehow incentivized home ownership would be very diffiult to design.

[AlexM]

[ QUOTE ]

1. Making it even as progressive as the current income tax system would be difficult.

[/ QUOTE ]

Not really. Simply charge a higher percentage for more expensive items. Most cash registers are computers these days anyway, so it can all be done automatically. The only real problem is finding a way to allow consumers to buy in bulk (say 1 16 pound package of beef instead of 16 1 pound packages), but I doubt that would be terribly difficult.

[ QUOTE ]
3. Flat tax proposals needed to be modified to continue incentives for home ownership to have any hope of succeeding without presenting severe problems for the economy.

[/ QUOTE ]

Why? Owning a home is the best investment most people are able to make without any tax benefits.

Mind you, I don't support any form of taxation, I'm just playing devil's advocate.

[pvn]

[ QUOTE ]
Those of you who have read my posts will be surprised to discover that I favor decreasing the income tax and savings (e.g. capital gains) taxes in the United States. How can that be the case?

The reason is that I support implementing a highly progressive consumption tax in the Unites States.

Now, the objections to progressive taxation tend to rest on incentive arguments i.e. "If you tax income or invesments too highly, people won't work as much or invest as much."

So, why don't we comprimise and implement a progressive consumption tax, allowing us to reduce the other taxes and reduce inequality?

[/ QUOTE ]

Won't this "incentivize" hording? I thought hording was bad.

[Copernicus]

Because taking away the tax benefits would cause an immediate devaluation in most homes of 25% or more.

[canis582]

FWIW, Bill Gates tax rate under this scheme would be like .00002 %.

[Metric]

[ QUOTE ]
FWIW, Bill Gates tax rate under this scheme would be like .00002 %.

[/ QUOTE ]

So, not punative enough for your tastes?