Thursday, October 13, 2011

A Progressive Consumption Tax

You tax experts out there, would this work?

Many economists have called for a consumption tax to replace the income tax. Invested money that is never spent promotes economic growth and has been compared to indiscriminate charity. The problem is that it is difficulty to make a consumption tax that is simple and progressive. So one way to achieve the goal might be to make it so a person can put as much money as they want, pre-tax, into an IRA. Then allow people to take as much as they want out of their IRA at any time but tax all withdrawals. You tax income not put in an IRA and the withdrawals at a same progressive rate. You could also allow people to buy a car or home in their IRA and rent them at market rates.  The result would be a progressive consumption tax.  You would also want to end the Corporate profits tax.

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1 comment:

Anonymous said...

Makes sense.