There are at least three things wrong with the consumption tax proposed as a substitute for the income tax in the USA.
- It is deeply unfair. I am retired. The money I spend for consumption is money that I earned, saved , and paid income tax on at least once (income tax on wages) and probably twice (corporate income tax on the earnings from which wages were paid.) I doubt if the retired community will tolerate this third bite at our remaining apple once they recognize it for what it is: a massive wealth transfer from retirees (and all other savers) to younger consumers.
- It is a tax on investment and thus a tax on growth. As we all know, when you tax something, you get less of it. Do we want less investment?
- Does anyone seriously believe that the govenrment will give up the revenue stream it receives from the income tax? I suppose that it might, for one or two terms of Congress. Then there will be another emergency or crisis that “needs” large sums money. If you think the politicians will really abandon their income-tax money machine, I have this bridge to Brooklyn that I want to discuss with you.