Personal Expenditure Tax

[Potus]

I had never even considered this idea before, but it does cover an awful lot of bases in terms of both raising revenue, strengthening the economy, and avoiding a tax system that crushes the poor.

This is a type of consumption tax that asks taxpayers to subtract their savings, investments, and, in my view, any service on debt from their total earnings. The remainder, the amount used to consume, can then be taxed at a progressive rate with people who spend more paying more.

The egalitarian issue with a VAT is that it would increase the tax burden on the poor. However, a personal expenditure tax would allow us to leave spending on life's necessities untaxed. It would also eliminate our systemic bias against saving and investing.

What do you all think? I have a generally positive feeling toward it, but I've not dedicated a lot of time to think it through.


Reference

[t_host1]

I had never even considered this idea before, but it does cover an awful lot of bases in terms of both raising revenue, strengthening the economy, and avoiding a tax system that crushes the poor.

This is a type of consumption tax that asks taxpayers to subtract their savings, investments, and, in my view, any service on debt from their total earnings. The remainder, the amount used to consume, can then be taxed at a progressive rate with people who spend more paying more.

The egalitarian issue with a VAT is that it would increase the tax burden on the poor. However, a personal expenditure tax would allow us to leave spending on life's necessities untaxed. It would also eliminate our systemic bias against saving and investing.

What do you all think? I have a generally positive feeling toward it, but I've not dedicated a lot of time to think it through.


Reference

...aah, I wouldn't waste much more time on it then, there's plenty of money-revenue coming in.

[King]

I don't get it. If it's a consumption tax, how are we keeping track of their savings, investments, and income for purposes of the deduction?

[Linus Van Pelt]

I don't get it. If it's a consumption tax, how are we keeping track of their savings, investments, and income for purposes of the deduction?

I take it the basic idea is that any savings account gets treated like a 401(k), except with withdrawals permitted in any future year, not just when you're old. So you can deduct any of your money left over in savings at the end of the year, but then when you withdraw it to spend, it gets taxed as income that year even if the labor income was earned in a previous year. In effect your income is taxed in the year you spend it rather than in the year you earn it.

[Sprouts Farmers Market ✘]

I don't get it. If it's a consumption tax, how are we keeping track of their savings, investments, and income for purposes of the deduction?

I take it the basic idea is that any savings account gets treated like a 401(k), except with withdrawals permitted in any future year, not just when you're old. So you can deduct any of your money left over in savings at the end of the year, but then when you withdraw it to spend, it gets taxed as income that year even if the labor income was earned in a previous year. In effect your income is taxed in the year you spend it rather than in the year you earn it.

Isn't this rich people just trying to play with marginal rates on each dollar? As if we need more of that. That seems like an obvious revenue inhibitor.