Consumption Tax / by kevin murray

Most everyone is in agreement that our current tax code is confusing, unfair, corrupt, complicated, and woefully inadequate in doing its true job which is to collect taxes fairly without dubious tax dodging or special tax shelters for well-heeled individuals.  However, our current tax code with its assorted lobbyists, accountants, brokers, and lawyers is too well entrenched to be overturned or vanquished in the near future.  For instance, reports from a chart created by The Tax Policy Center that in 2011 there were: "491,000 Americans who made more than $100,000 a year who paid no income tax."  With our country running massive deficits it would seem worth our while to take a look at other forms of taxation that might pull their weight and thereby provide us some leverage for needed tax reform.  My suggestion is a modest consumption tax to be applied forthwith,


The estimates that in 2011 the United States Final Consumption Expenditure was $13,323,400,000,000.  That is a massive number and if there was a consumption tax on everything that we consume or purchase such as homes, medicine, food, boats, phones, and automobiles, and we were to tax those items to the full estimate of our annual consumption at the rate of 2 percent, that would bring in estimated revenues of $266.5 billion.   I consider 2 percent to be a reasonable percentage in which it is high enough to produce meaningful revenue but low enough not to be an oppressive burden on the public at large.  No doubt, there would be an outcry for this industry or that product to not be taxed, or to tax some items at one rate and others at another, but for sake of simplicity, this is the 2 percent flat consumption tax, and this consumption tax should tax everything without exception and that would simply be the way it would be and people and businesses would eventually adjust to it--with perhaps both parties having to sacrifice some small part on either end.


Some would cry that this form of taxation is regressive, I would counter that it is fair.  A tax that offers no end-arounds, workarounds, and no dodges, and furthermore only taxes you when you consume or purchase something is reasonable.  A family that spends $100,000 will have to pay $2.000 in consumption taxes and a family that only spends $20,000 will have to pay just $400 in consumption taxes.  One family bought more and so they rightly pay more in aggregate, and the other family bought less and therefore paid less.  A consumption tax would also encourage a modest increase in our savings rate, since this tax is not applicable to people that save money, and with our savings rate having been in a downward spiral since the 1980s this is an important and needed step in the right direction for Americans when it comes to financial responsibility.


Finally, a consumption tax puts all Americans in the same boat, from coast-to-coast, from youngest to oldest, from richest to poorest, it is a form of tax democracy in which no favors are given out and no angles can be played.