Consumption Tax

[Erc]

There's been quite a bit of talk about this lately...first Jim deMint, now Allen Greenspan.

How exactly would this work?  I've heard people throwing around some sort of exemption below which it wouldn't apply...but how would you implement such an exemption?

And is there any chance whatsoever of this getting implemented in the near future?

[True Federalist (진정한 연방 주의자)]

I hope this doesn't pass.  While all taxes affect the economy, they impact whatever you apply it to the most because that's where they have a direct psychological effect.  A tax on consumption would of course have as its primary effect the reduction of consumption and consumption is what drives the modern economy.  The only reason to even consider such a tax would be if it was either easier to enforce or collect so as to reduce the expenditures made there.  The inefficencies of our current income tax system derive not from it being an income tax but all the niggling loopholes, tax credits, and other assorted cruft that have been added over the past 92 years to it.

[A18]

A consumption tax will discourage consumption is you add it without reducing the income tax in proportion. If you do reduce the income tax in proportion, people have more money, so the net effect is neutrality.

[True Federalist (진정한 연방 주의자)]

You're forgetting that a good portion of consumption is financed by debt.  which means that under our current system the net tax paid by such purchasers is deferred until the income is received.  Switching to a consumption tax will cause the tax to become front loaded for them and thus serve as a disincentive to their consumption.  Psychologically, people are geared to be more sensitive to current costs than future costs.  The baneful effects of a consumption tax are all psychological, but that doesn't make them unreal

[No more McShame]

I would favor the federal consumption tax ONLY (and I said ONLY) if the 16th Amendment (allowing for an income tax) was repealed.  The concept is great due to encouraging savings and lower compliance costs, but the idea of government taxing both consumption and income is frightning.