Consumption Tax News & Views
Welcome to Consumption Tax.org, the most complete research and news center for all news related to consumption tax and economics.
Thoughts on the Consumption Tax
Especially in these tough economic times, saving is becoming more difficult, unfortunately saving is punished by the tax system through taxes on interests, dividends and capital gains. When you are saving and not hindered by taxes people are encouraged to spend more and "consume" more.
Therefore the alternative would be to tax consumption. Many economists believe that a consumption tax is better than an income tax, and easy as well, where consumers can file taxes by subtracting their savings from their net incomes.
Can we afford a US auto manufacturing collapse?
The white house is saying that theUS cannot afford a collapse of the major automakers in the United States. The senate is leaning towards the signing of the automaker bailout bill. Dana Perino the White House press secretary recently released that the jobless claims in the US are at the highest level in 26 years.
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Does our economy currently need a Consumption Tax?
As recently stated in the New York Times the United States might not need a consumption tax based system. An economy in a recession or depression needs fewer taxes, not more.
A consumption tax in our current economy might kill consumption of products. Many stores would be hit hard with the need to pay more for goods purchased and the already declining Detroit auto industry would definitely fall even further with additional taxes levied on automobiles.
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The 2 Cents
As the United States is in the process of ushering in a new president to the White House along with a new Senate and Secretary of the Treasury, it seems that the American population is becoming more concerned about the future of their taxation, and business owners are working to understand all aspects of consumption taxes and additional business laws. Here you will find links to current events and articles on consumption tax and other tax related sites.
Positional consumption and progressive consumption taxes
David R. Henderson criticizes Robert H. Frank’s proposal for a progressive consumption tax as a means to internalize the negative externality related to positional consumption by the rich in Robert Frank’s Strange Case for Taxing “The Rich” .
Part on Henderson’s critique focuses on the importance of social comparisons on driving consumption choices and suggests Frank may have overstated it. In the article Social Comparison Affects Reward-Related Brain Activity in the Human Ventral Striatum,
in Science, 23 November 2007, Fliessbach et al “provide neurophysiological evidence for the importance of social comparison on reward processing in the human brain.”
California Proposes $4.7 Billion Tax Hike
California Governer Arnold Schwarzenegger proposed a new plan for California after months of their state budget deficit increasing. Schwarzenegger would like to outline spending cuts as well as a temporary 1.5% sales tax increase.
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What is Consumption Tax?
Consumption taxes are imposed on the income or expenditures of goods and services. The structure of consumption tax is similar to value added taxes, sales taxes, or income taxes. Consumption taxes do not include investments.
History of Consumption Taxes
Alexander Hamilton an author of the Fedaralist papers was a supporter of consumption taxes because of their difficulty in raising to confiscatory levels moreso than income taxes. A detailed analysis of consumption taxes were presented in 1974 by William Andrews.
Andrews proposal would only tax people based on what they consume while not involving their current savings.
Chinas Car Consumption Tax Change Takes Effect
A View on Consumption Tax
There is a lot of discussions about environmental problems and how to address them e.g. by increased regulations and/or by appealing to "environmental consiousness".
*** Why not replace income tax with consumption tax ? ***
This should create very powerful market incentive to conserve resources (energy in particular) and as additional benefit could simplify tax system - quite a nightmare and in itself resource drain in US.
In its simplest form "consumption tax" can be simply implemented as national "sales tax" where every transaction is taxed by the same percentage. The whole change in the tax system should be "zero-sum" i.e. the total amount of tax generated should be the same. Of course some tax payers would loose and some would gain because of this change. In general those who are frugal with resources usage would gain and those who are wasteful would loose - and I hope most people would agree that this is a good thing.
In another form I can imagine system in which usage of only certain most valuable resources are taxed (e.g. energy, fuel, water, maybe few others). Increase in cost of energy etc. would of course push prices up, but remember that there are no income taxes and the whole change should be "zero-sum!This way products, which are enviromentaly expensive (because of energy and other valuable resources needed to produce them) would cost much more.
There are a lot of similar ideas implemented already in a piecemeal fashion e.g. pollution trading, incentives for green energy, etc...The idea is to simplify the whole concept and push it to its logical limits.
Because of the scale of the change probably it should be "phased in" over the extended period of time e.g. 10 years.
