Hoover Institution: Opinion: Edward Paul Lazear: How to Energize a Lackluster Recovery: The Benefits of the Consumption Tax Over the Income Tax



Hoover Institution: Opinion: Edward Paul Lazear: How to Energize a Lackluster Recovery

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The U.S. income tax is now the biggest book ever written in the history of the world, at least as far as I know, standing at over one-million pages.  How would you like that for a book review homework assignment?  This system is in drastic need of reform.  I propose a National Progressive Consumption Tax or NPCT.

This eliminates, perhaps,  the biggest book  in world history and tells Americans that what they make and earn is legally and officially theirs but Uncle Sam will take a percentage of what they spend to provide the needed services that only the Federal Government can.  This system eliminates a lot of taxpayer funded subsidies to businesses and wealthy individuals.  No one would be able to avoid the NPCT except the working poor who would receive a scale of exemptions to replace the Earned Income Tax Credit.  They would be eligible for other subsidies to help them move up the economic ladder simply by reporting their annual income to the IRS.  The NPCT would be progressive because low-income people spend almost all of their money on the basic necessities of life which would be taxed at a lower rate than luxury goods.

The NPCT would be good for economic growth.  Taxes on capital gains and business incomes could be reduced.  Basic necessities would be taxed at low rates.  Food, housing, and non-luxury transportation will be consumed because people have to have those things.  The wealthy would continue to spend money on their play toys even if those things are taxed more highly.

Savings will be encouraged, resulting in less consumer debt.  In the next recession, people would have the means to continue supporting themselves and we would have less need for public assistance. 

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About Rik Schneider

Blogger/writer on a lot of different subjects.
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