A consumption tax is a neat idea that doesn't actually address the problem that income tax tries to address. The reason there is a graduated-bracket tax system has nothing to do with consumption and very little to do with mere purchase power. Money is a form of capital and capital is a mode of production, the reason the rich pay more in taxes is because they have a greater propensity for amassing control of the modes of production. If you limit this natural control, if you reject Keynes, if you neglect the proletariat, the result will be catastrophic. Mark my words Skrum, it may not be in your lifetime but it will definitely be in mine: if the US and other G8s do not reintroduce keynesian fiscal policy the nation will have another great depression on its hands. In fact, even if it does introduce it it will only buy the capitalist system some time.


Ultimately capitalism (as it is in the US) is a very flawed system and it will only work so long as you have technology poor markets that are rich in raw resources (i.e. what china, japan, korea, etc were). Thax will find this interesting, this is an excerpt from a famous economist's take on capitalism:


"Ok, let's take this fictional country and take a snapshot of its economic action for a period: say a year. During that year, goods will be manufactured, services will be sold, people and companies will receive earnings. Profits will be made. Let's add them up.

The total earnings made by all people and corporations in the year plus any savings held over from previous years represents the total available revenue to purchase any goods and services which are made available to purchase during that year. Similarily, the total retail price of all goods available and services sold during that year represents the total cost of all production in that same period.

Herein lies the problem. If the system requires that a profit is made, or at least breaking even if not a profit, the total earnings must be less than or at most equal to the total retail value of goods and services sold.This means that it is impossible, in a profit oriented system, to sell all the goods and services created, based on earnings alone. (It can be shown that because of entropy and inefficiencies in any production system, you can't even do this if you try to go for no profits...) This leads to overproduction no matter how efficient you make the system."

TL;DR of that, basically in order to make a profit all of the goods you sell must cost more than the money people have earned this year or saved from the past. Ultimately that is unsustainable because total earnings can never be equal to the total value of product (in a profit oriented system). So there is a natural negative sink on the economy, unless you pawn off overproduction on other markets, like China, Japan, or Korea. Unfortunately those countries are become exceedingly savvy in industry and no longer need our products.


Marxism (the player) is right. Karl Marx is right too, ultimately something resembling socialism will replace capitalism. After capitalism runs its course of course. Mercantilism was only around for about 300-400 years, how long do you think capitalism will be around for?

Could not agree more with Boner Oiler. A consumption tax is inherently unequal for two reasons.

Firstly, America's economy is consumer-based, wherein purchases made by consumers keep the economy running. Any amount of research will lead you to the conclusion that the lower and middle classes are the primary consumers, and thus the primary movers of our economy. This also ties into my second point, which is...

That, because the consumers are largely poor, any tax that is consumption-based is inherently unequal because, to a poor person, $200 is a significantly larger chunk of their monthly earnings than it is to a rich or even middle-class person.

So, while it may feel nice for moderates to point to consumption-based taxation systems and say "Look! Everyone's paying an equal, fair share!" it is inherently unequal in that a certain chunk of a poor person's money is inherently more than that same chunk of a rich person's money.

Right, because rich people don't consume billions and billions more than poor people.

Thank you for the meaningless, snarky one-liner without any forethought, analysis, or research.


Oh wait.

In reality, there are two facts in the way of Thraxle's argument:

1) That there are many, many more poor people than there are rich people, and that these poor people are constantly buying goods and services. This is why you see a return of $0.40 on government money spent on welfare, and a loss of $0.70 when that same money goes into the military-industrial complex.

2) That rich people disproportionately put their money away instead of spending it. Yes, rich people buy houses and, well, have to eat too, but a huge chunk of an average rich person's money goes away into a savings account of any kind. Much, much more of a rich person's capital, on average, goes into savings when compared to how much they spend. This is why trickle-down/supply-side economics does not work. It never trickles down because rich people save their money.

Sorry, I meant a gain of $0.40 and a loss of $0.70, respectively, ON EVERY DOLLAR SPENT.

Wealthy people consume (in relation to their net worth) a far smaller percentage on annual basis. Consumption can't keep up with your increases in wealth, which is why there are people with net worths in the billions and climbing.

Furthermore, buying bonds, stocks, or investing isn't consumption but it was what most wealthy aristocrats spend their money on. The effect of this is two fold: 1) their money never trickles down into the economy and 2) their money only increases in value and by definition it is stealing value from everyone else's currency. Therefore it follows that wealth is actually trickling up... which would explain the graphs on wikipedia that demonstrate how income disparity has been growing tremendously since reaganomics were introduced.

Lol Marx, we made the same points at the same time.

do I have to be the first one to mention that what jobs are lukerative is a product of the economic system, the resources and especcially the monetary system, so a progressive tax is not neccearily unfair, because the rich have extra "free" income from the kind of system that is in place. progressive tax systems is actually one of the best ways to rectify that

Boner:

The value of goods and services produced is equal to the value added paid to all the producers in the chain of production from raw materials to the finished product sold at retail. Profit is part of the value added because it is the payment to the entrepreneurs for their skills in managing the production. The only leakage is capital consumption (depreciation) which can be offset by new investment, which is financed by saving, and in the Keynesian system there will be enough saved funds at equilibrium to finance. So there is not an imbalance caused by profits.

In regard to rich people saving more, you appear to have a confusion of average propensity to consume (consumption/disp. income) and marginal propensity to consume (additional consumption/additional disposable income). Whether taking from the rich and giving to the poor increases or decreases consumption is based on the difference in their marginal, not average, propensities to consume. And since we have differences in individuals, we have differences in their marginal propensities to consume.

A tax on all income discourages investment. A tax on consumption only allows anyone, rich or poor, to become richer by folding over their profits into their companies instead of spending more on consumption.