I'm not sure how the consumption tax works in reality. People consume many things (more or less) equally and in large amounts. If you increase the tax on those things significantly, you really screw those with less money.
A consumption tax is also a disincentive to spend money.
The consumption tax sounds attractive, in theory. I believe Congress would screw it up, greatly, with exemptions. It only works if you don't **** with the basics.
It doesn't, necessarily, screw those with less money. Prices include all of the built in taxes paid along the way and the army of accountants and lawyers kept on retainer to avoid taxes. Theoretically, prices would fall. The reality is that they, likely, would fall. Therefore, while you might pay a 10% sales tax on the item, the price, likely dropped along the same lines. Now, everyone pays something, and the evil rich that spend more also pay more.
You have removed most of the IRS and that saves a **** ton of government spending. You get rid of all of those lobbyists who are trying to get all those corporate income tax exclusions and, since you aren't supposed to **** around and add exemptions to the sales taxes, you don't need lobbyists to get those exemptions.
Nobody works less to pay less income tax, but they'll be inclined to spend less if they have to pay more in taxes.
Not, exactly, true. If I can invest in my company and hire 5 more people and increase my revenue by X%, but my profit on that extra revenue is less than my current rate of return on what I have already invested, what do I do? Take on the increased risks and liabilities for a lower RoR? Seems unlikely. I look at other alternatives. So, while I'm not "technically" working less to pay less income tax, but it is, certainly, a consideration.
