Is The Progressive Consumption Tax Really The Way to Go?

I recently read an article in Forbes about "A Tax Even Libertarians Can Love". Just the title made me curious as to what kind of a tax my close libertarian friend supposedly would like. The tax they discuss is a progressive consumption tax. Robert Frank proposes getting rid of our current income tax system and going to a progressive consumption tax. They discuss how this would be beneficial because it promotes saving and taxes those who spend lavishly. I'm not going to go into all the details of how is kind of a tax would work but feel free to do some more research on it if you are not already familiar with it.

After reading the article I was disappointed in this tax that would promote thrift. I do agree that our current system is broken and we do need to change to a tax system that favors saving and good behavior. I just don't feel like this tax is it.

Here is what I didn't like about the progressive consumption tax:

  • There is a difference between saving and hording. This type of a tax would incourage people to hord their money and discourage good Christian behavior.
  • What about giving to charities/ tithing? There is more to your budget then spending and saving. There is a third componient of giving. It doesn't seem right to be taxing me on my giving as if I was blowing that money on a new tv or car.
  • One of the current issues with today's tax system is reporting incoming. This would not be addressed. Meaning that those who get paid cash under the table (day labors, drug dealers, prostitutes, etc) would still not have to pay their share of taxes.
  • The system is supposed to incourage higher income and savings. However, if their is a sliding scale for the taxing rate as proposed then it still doesn't incourage you to increase your reportable income.
  • The last major flaw is that you still have a large government oversite and over barring tax system to mess with.
At the Not the Jet Set household we are true believers in the "Less is More" saying. For us a Fair Tax system seems to be by far the best option that is truly fair and involves less government oversight/ control.

Do you think I'm totally off base with the progressive consumption tax? What are your thoughts?


Anonymous said...

I'm not sure the author is a libertarian. Most libertarians I know support a value added or retail tax coupled with a constitutional amendment specifying the exact tax rate (so Congress may not change it on a whim.)

A key libertarian tenet is to reduce government, not increase it. The plan outlined by Mr. Frank doesn't seem to meet that goal.

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