March 30, 2015

TAX WHAT YOU DON'T WANT, NOT WHAT YOU DO:

Tax Proposals Would Move U.S. Closer to Global Norm (JOHN D. MCKINNON,  March 29, 201, WSJ)

U.S. lawmakers on both sides of the aisle increasingly are finding appeal in an ambitious concept for overhauling the nation's income-tax system: a tax based on consumption, a tool long used around the world.

The tax-writing Senate Finance Committee is giving new consideration to the consumption-tax idea with the hope that its promised boost to economic growth would ease the way to a revamp. [...]

Many GOP members "believe that there are economic benefits to moving away from taxation of income and toward taxation of consumption," a Senate aide said. That includes Republican John Thune of South Dakota, co-chairman of the working group along with Mr. Cardin, the aide said.

As the name implies, consumption-style taxes hit the money taxpayers spend, rather than income they receive. One prominent feature of consumption systems is that they generally tax savings and investment lightly or not at all. That, in turn, encourages more investment and innovation, and ultimately more growth, many economists contend.

We are all Pigovians now. Of course, the key is to not tax income.

Posted by at March 30, 2015 2:05 PM
  

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