Quote from SWhiting:
Consumption Tax: Continuing with the same numbers that I cited above from my 2007 tax returns. Of the 159K Adjusted Gross Income, we spent approxiamately 48K during the year. We track our expenditures in Quicken and we slice the data very fine. For example, some of our categores include: Food- Groceries, Food- Eating Out, Lottery, Vacation- Lodging, Vacation- Food, Alcohol, Cigarettes, Insurance- Auto, Insurance- Health...you get the idea.
Now, in 2007 we paid 28.7K in Federal Income Taxes. In order for a Consumption Tax to generate the same amount of tax revenue you would have to have a tax rate of 59.79% !!! (28.7 / 48).
It would really be higher because all Consumption Tax proposals that I've seen would exempt Food, Medicine, and many other 'things'.
In addition to failing to generate enough revenue, the Consumption Tax is extremely Regressive. Consider a family of 4 who only makes 60K per year. They HAVE TO spend every dime they make just to stay alive: they would be taxed on all of their income. Meanwhile, we would be taxed only on the 48K that we spend.
Those who make the least are paying the highest percentage tax rate. The "rich" will get richer and the poor wil get poorer at an even greater pace than we are experiencing now. And that is the biggest problem facing our country today.
