[oarsinsync]

Sounds like a consumption tax. Doesn't that end up causing a higher effective rate on lower earners, and a lower effective rate on higher earners?

[intopieces]

Yes, which is then negated with rebates / negative income tax.

[oarsinsync]

So the end result is... lower taxes all around? Where does the deficit get made up?

[intopieces]

High income earners don’t get the credit. Similar to how there is an income cap on incentives for EVs in California

[oarsinsync]

But high income earners still benefit from a lower effective rate from the change.

If low income earners pay a higher effective rate than they would under income taxation, which is to be neutralised by credits, and higher income earners pay a lower effective rate, who makes up the deficit?

[jdblair]

Yes, it's a consumption tax on something you want to reduce the consumption of, not across the board on all products. Most proposals include an offset (e.g., basic income guarantee or negative income tax rate) for low income earners.