The Economic Benefits of a Consumption Tax?
When I first learned about the FairTax, one of its most immediately attractive features, to me, was that it taxed consumption rather than income.
Consumption taxes, as many economists have pointed out, are far more beneficial to the economy, since they encourage savings and investment, rather than penalizing them the way an income tax does.
Increased savings and investment means more innovations in products and services, more jobs created, more wealth from returns on investment (go middle class!), and greater economic mobility for those with lower standing.
In subsequent discussions of the FairTax, however, I’ve seen very little consideration of these basic merits of moving to a consumption tax.
We see discussions of everything else — the prebate, the impact on this-or-that group, whether government expenditures oughta be taxed, etc — but I’ve seen barely any discussion at all of the more globally significant economic benefits of a consumption tax.
Apparently “it’s the economy, stupid” — except when it involves eliminating a Marxist-inspired income tax? If a consumption tax significantly boosts savings, investment, and economic growth, isn’t that the mother of all “rising tides” that lifts all boats?
Anyway, I’d like to offer this post as an open thread for (summarizing as well as linking to) information about the economic benefits of a consumption tax, as compared to an income tax.
NOTE: If you want to bash consumption taxes as regressive — which is mathematically untrue, by the way — or the worst thing since Bushitler, please do that somewhere else.
This thread is for summarizing (and providing links to further discussion of) the economic benefits of consumption taxes.
And, er, you know, real benefits — so no need to point out how you’d have the perfect excuse to move to the Bahamas, right Hayden? 😉