Whatever Happened to the Consumption Tax?
Income taxes are focused on the value we add to society as measured by income. But should we focus more on what we consume?
Tax policy is an area that usually elicits groans, rolled eyes, and general statements of dissatisfaction with the Internal Revenue Service (to put it mildly). I try not to bring it up at parties.
But taxes are, as they say, the only certainty in life apart from death. They are a necessary part of a functioning government and society.
In the United States, tax law is enormously complex. An often-circulated factoid is that the federal tax code is 70,000 pages long. While this is not true (it’s more like a couple thousand), it is true that the complexity reflects a number of things. First, taxes matter very much to those paying them. Second, taxes have the capacity to influence decisions and outcomes, both at the individual and corporate level.
At the federal level for individuals, the tax code revolves around the income tax. It’s progressive, which means that the first X amount of money you make is taxed at the lowest rate, then the next X amount is taxed at the second lowest rate, and so on. (If you are interested in the specific rates for 2018, see the chart here.)
This makes intuitive sense — those earning more pay more taxes. If I make $100,000…
