Today, Alan Greenspan Touts Idea of a National Sales Tax (via AOL News). I’ve always said that the one person in the US Government who holds all the power isn’t the President, but the Chairman of the Federal Reserve Board, Alan Greenspan. He’s my hero and idol, and yet again, today he reaffirms my faith in his incredibleness.
So, the idea is to overhaul the tax system and move from an income-based tax system to a consumption-based tax system. This is absolutely fantastic! It encourages saving (read: no more Social Security problem if people can finance their own retirement) and places more of the tax burden on those who spend money (read: big business) — this is the only system that really makes sense. While I wholly enjoy the benefits of an income-based tax system where those with large incomes can find allowances by the tax code to reduce their net income and lower their taxes, it does favor the wealthy and places more burden on the lower-income constituency. This is fine if you’re on the “right” side of the equation, taking advantage of tax breaks offered — the current system is naturally biased in favor of wealthy land owners, who were the founders of this country. However, the lower-income working class get exploited by having the tax burden placed on them. Yet, according to the article, “Democratic critics contend such a consumption tax would hit low-income Americans the hardest.” It’s this same lack of understanding that the Democratic critics exhibit that make me glad they didn’t win the last election.
More evidence of Greenspans genius: “As in past remarks, Greenspan said he supports tax changes that promote capital investment, such as the reduction of taxes on dividends.” Gee, make it more attractive for people to invest their money in big businesses, who in turn spend money and paying consumption tax! How perfect is this? Since I’m not paying income tax, I can take even more of my earned income and invest it which will make me even more money as dividends and help big businesses grow, who in turn pay the taxes to fund the government! This proposed reformation to the tax code, it’s downright Edenian! (Okay, so I just created that word, since utopian carries the negative connotation of ideal but impractical schemes, the Eden in Edenian refers to the Garden of Eden from Biblical context, which is a true paradise and state of ultimate happiness.)
Of course, I won’t be able to totally stop being a consumer, so I’ll have to pay my fair share of consumption tax. But, if it’s collected like today’s sales tax at the time of purchase, rather than today’s income tax which causes much grief and anxiety once a year, it at least makes my life easier, and businesses are already set up to collect sales tax, so it really isn’t an added burden for them. Greenspan even recognizes this by saying, “‘A simpler tax code would reduce the considerable resources devoted to complying with current tax laws, and the freed up resources could be used for more productive purposes,’ Greenspan said.”
The one thing that wasn’t mentioned in the article was whether the consumption tax would be a tiered or scaled system, where certain goods are taxed differently than others. I think certain essential items such as food products — perhaps even a small subset of food products — should either be consumption tax free or have a reduced tax. Luxury items, on the other hand, might carry an increased consumption tax, such as jewelery, automobiles, etc. Regardless, a consumption tax-based system is orders of magnitude better than an income tax-based system, especially the one we have currently implemented in the US.
Now is the time for everyone to embrace change and be vocal about something that really matters. If you’re the type to write to your local government representative, do it, and tell them it’s important that they support a reformed tax code which is consumption tax-based. Hell, people who know me know my position on voting, but if this came up as a referendum on the next ballot, I might bend my personal rules and go stand in line with the dirty huddled masses and vote, just on this issue. That’s how much this tax reform means to me.
I just hope this tax reform happens … and within my lifetime …
Programmer, husband, father, singer, guitarist, tinkerer, reverse engineer, strange, and living in New Jersey. 
Really good comments. I’m with you for the most part. I’m lean a little more towards the Fair Tax but anything in that direction is an improvement. I do fear a hybrid of income and sales tax. I think that would defeat the benefits and just prove to increase our taxes.
BTW, I linked to you in my post but your trackback doesn’t seem to be working. I get a 404 error.
FYI, there was a time when I started getting trackback spam, so I’d killed it. I’m turning it back on now but I don’t have the time to re-implement it with spam blocks in place, so if the spam starts up again, I might shut it down again.
Unfortunately your reasons for wanting a consumption tax are the reason we shouldn’t have one. Think for a minute that you are a lower income person, all of your income has to be spent on the basic neccessities of life like food, clothes, shelter and expenses due to working (whcich would be taxed)- then you would be totally taxed on ALL your income. Then imagine that you are very wealthy, and you can invest or save or in laymens terms – make money on your money, you would be paying tax only on a small percentage of your income because you can afford to do what the poor cannot. This system will only make the rich become richer and keep the poor down and in the long run it creates class wars and recession because the lower and middle class are punished for trying to survive, and if they can spend less – they will. Remember the secret mantra of the rich – to get richer, you don’t have to have more money, you just have to make the poor have less!
Poor people will have to learn to live within their means and spend less if they want to avoid paying less taxes. Rich people will have to do the same.
Today, rich people can get tax breaks and pay less taxes than poor people (from an absolute dollar amount perspective). This is just plain wrong.
Except for people who are born into money, those who are rich became rich because they knew how to save money. I’d love to see a tax reform such that people are incentivized to save money. That’s the true way to promote class elevation, encouraging people to do the things that will get them out of the lower-middle class, like saving money.
Many people who “spend all their income on basic necessities” have a far too broad definition of what “basic” means. That’s part of the problem with this country. We live in excess and people think they have an entitlement to what others have. This also needs to stop.
here is my idea on the Consumption Tax and how the republicans can get there mojo back
do you do the right thing – not smoke, eat right, go to school, not break the law, try to recycle
if you do these things and are poor that a problem for me
ask the average joe and the American people do the go to work and pay taxes to support people
who smoke, don’t eat right (see the movie supersize me – think of the extra heath cost (soon under obama
tax cost),dont go to school,etc
its time for people and American people to pay based on results and stop living beyond there means and having the
average hard working American pay for it
my plan
keep the income tax on people above 125,000 or so – that’s just a number i picked it can be debated and go up or down
then get rid of all other taxes – people and corp
then have a consumption tax on bad things
no tax on non processed food and recycled items, other good things that society can decide on.
tax fast food, smoking the most (i personally would legalize drugs (expect under 21, get caught selling or giving to kids life sentence) and taxes them the highest (call it the new death tax – to pay for there death and heath care cost) and require you to show you have 40 hr a week job to support the habit – because you never going to stop someone from using that wants to)
tax the rest of products a normal rate
instead of having a jail system like today for nonviolent offenders have weekend workcamps – if you steal or have a dui work weekends for a couple years (like 10 to 15) on a farm – that will have end illegals – if the farms and other low paying jobs are done by lawbreakers than the demand for illegals will dry up and stop both it and crime.
industry that provide high paying jobs (like auto that make high mpg cars) that we want here in the USA – don’t tax what they sell or what the buy to make the product
from the taxes from smoking, fast food, other consumption products give a reward for completing school or training for a new job
you the average Joe that does not smoke, eats rights, recycles and goes to school will pay less and have a better life
the coming baby boomers that are going to live the work force is going to mean either we start rewarding for recycle and doing the right things or lower are stardered of living