John McCain vowed to put Alan Greenspan on his best and brightest budget task force - Dead or Alive. Interesting idea. Maybe he can have the chair next to Bin Laden. This sounds like an idea best forth by a dead man or at least one not interested in the opportunities of the living. Robert Frank makes the case for a national consumption tax in the Sunday NY Times business section. And he makes a fairly strong case.
Under such a tax, people would report not only their income but also their annual savings, as many already do under 401(k) plans and other retirement accounts. A family’s annual consumption is simply the difference between its income and its annual savings. That amount, minus a standard deduction — say, $30,000 for a family of four — would be the family’s taxable consumption. Rates would start low, like 10 percent. A family that earned $50,000 and saved $5,000 would thus have taxable consumption of $15,000. It would pay only $1,500 in tax. Under the current system of federal income taxes, this family would pay about $3,000 a year....
Consider a family that spends $10 million a year and is deciding whether to add a $2 million wing to its mansion. If the top marginal tax rate on consumption were 100 percent, the project would cost $4 million. The additional tax payment would reduce the federal deficit by $2 million. Alternatively, the family could scale back, building only a $1 million addition. Then it would pay $1 million in additional tax and could deposit $2 million in savings. The federal deficit would fall by $1 million, and the additional savings would stimulate investment, promoting growth.
While it has an undeniable appeal of lowering taxes for the poor and middle class and encouraging savings and investment for the upper class, you have to wonder what happens to an economy that has been predicated on reckless consumerism.
For instance, that hypoethical family who might decide not to make the million dollar addition to their mansion. What are those illegal immigrants supposed to do? How are the contractors and subcontractors hiring those illegal immigrants supposed to afford a new boat?
It might not be all that horrible considering we don't have much of a manufacturing economy so the products we aren't consuming wouldn't cost that many American jobs. It might alleviate the pressure to continue the artificial devaluation of the dollar and increased savings would help reduce the amount of dollars held by foreign banks.
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The "steepness" of progressivity is just another ruse that will lead to more manipulation and political control by the privileged class (politicians and lobbyists for the wealthy and special interests).
The freedom of enterprise in this country is being systematically destroyed by our "social activists" in Washington.
The plan that truly returns power to the people is the FairTax plan which untaxes income, scraps the tax code, eliminates 53% of the Washington lobbyists that game it, and it eliminates hiding taxes in the cost of goods and services by eliminating income and payroll taxes for business.
Since, as Greenspan has instructed, only citizens end up paying taxes, it is VISIBILITY that will ensure our economic system's survival. Renown economist Laurence Kotlikoff believes that failure to scrap the tax code and enact the FairTax - choosing instead to try to "flatten" what he deems to be a non-flattenable income tax system - will eventuate into an irrevocable economic meltdown, because of the hidden aspects of the current system that make political accountability impossible.
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