[whamlastxmas]

High consumption tax creates an incentive to not spend your money, which is bad.This also means the millionaires and billionaires of the world get to invest their money tax-free to earn even more money, often with rent-seeking, while 95% of America is getting taxed essentially up front on the vas majority of their earnings because it gets spent on stuff like housing, food, and healthcare.

This creates a massively regressive tax system, which is a super shitty thing unless you're a libertarian who can't understand the concept of marginal utility.

[revo13]

So you are content with having a tax system that treats you like a 1%er in the event that you cash in a payday (say $1mil - 35-40%) during a given year, despite the fact that you may have worked your whole life at a middle class level, scraping to save? A consumption tax would allow individuals to actually make choices about how/when they are taxed. Lets be honest, people will still want their "stuff". If they have more money in their pocket, they will spend. That is what America is built on. I would like the opportunity to defer spending at my choice in order to save more in the present without being taxed into oblivion.

And I'm sorry if you didn't read my entire comment. Of course an ignorant consumption tax is regressive. SAFEGUARDS would have to be in place to ensure that the population can acquire necessities without an undue burden being placed on them. Exactly the things you mention: housing (single home), food, healthcare. However, 50"+ 4K TVs do not fall in that category. 30' fishing boats do not fall in that category. Certain items in sales tax heavy states (Texas) already do this is the form of tax free checkout for certain item classes (food at grocery stores).

[whamlastxmas]

If I normally make 60k a year and get a one-time payday of $1MM, I'll be paying around 13% more in income tax on that million dollars than I do on my regular income. Even with AMT it isn't a huge deal. This seems pretty reasonable to me. It's not perfect but it's not a reason for completely eliminating income tax. It's a reason for having exemptions, which is exactly what this article is about.

>If they have more money in their pocket, they will spend. That is what America is built on.

This is simply not true for people with millions of dollars. Look at the percentage of income spent for someone making $500k a year, and the percentage spent by Bill Gates or any other billionaire. It's a huge difference, and there's a huge difference between both of those groups and someone making $100k a year who is usually spending almost all of their income. Consumption tax is also completely ignoring the "spend it overseas" and million other loopholes.

I am not convinced any method of consumption tax I've read about, regardless of safeguards, would retain the same level of tax income the government receives while also not increasing the burden on lower and middle income households. The vast majority of tax revenue comes from an extremely small percentage of earners, and you'd be losing the vast majority of that income if you only taxed their spending.

The only way I can see this working is if you almost exclusively taxed things rich people bought. Increase sales tax on homes over $1 million, cars and boats over $200k, private jets, etc. But the tax rate on these would have to be ridiculously high, more than doubling their costs. All the rich people would just buy them overseas.

[revo13]

$60,000 income with std deduction and personal deduction equates to a tax burden of $8,219 or effectively 13.7%. $1,060,000 income equates to a tax burden of $406,314 or effectively 38.3% (treated as a short term capital gain).

That is money I could have saved and invested BEFORE being taxed an extraordinary rate for it relative to my place in life. I happened into money when I'm typically taxed at <14%, and nearly 40% of it is taken from me. Simply because I earned it over the span of 12 months. What if I built a company over 10 yrs and that is the culmination of that?

>> All the rich people would just buy them overseas.

That is a fair point. That said, if I buy something overseas from Europe right now, I don't pay VAT (coming from US). A large number of vendors compensate for this and keep the prices for US purchasers high and not an exact match to their Euro prices. So I think in practice you would see overseas retailers raising their prices to come close (or match) the US price that includes the consumption tax. That would balance out and lead people to do the easy thing and just buy in the US. Maybe... Maybe not...

[djrogers]

> All the rich people would just buy them overseas.

You can't live in a home you buy overseas without living overseas. As for cars, boats, and planes, you pay consumption based taxes when you register them - that's the way state sales tax works on such things in most places today.

[st3v3r]

Content? No. But it's still far better than the system you propose.

[stale2002]

If people don't spend their money that is wonderful!

They did a whole bunch of useful works and in exchange accepted a bunch of green pieces of paper for that work!

They never consumed any resources, just ones and zeros in a computer.

Instead of paying 40 percent in taxes, they paid 100 percent!

[whamlastxmas]

Obviously you're being sarcastic - you're right, the money gets spent eventually. But not by the billionaire. It gets spend by his kids, and his kid's kids, and so on, for generations. Meaning money that should have been taxed once in a single year is instead taxed over the course of 200 years and increasingly so on tax-exempt consumption. Meanwhile, that tax-free money is being used to invest in rent-seeking enterprises, meaning the cost of living for everyone else is being driven up. It's essentially a free loan from the US government for decades upon decades.