Should the United States Move to a Consumption Tax?
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Would-be tax reformers on Capitol Hill are taking a “blank slate” approach to the issue. Dave Camp and Max Baucus, the House Republican and Senate Democrat in charge of the tax law committees, say that every tax break is on death row unless a strong case can be made for it. This method rightly recognizes that not all tax breaks are the same: Some of them have better justifications than others. What the blank-slate approach misses, though, is that not all supposed tax breaks are even tax breaks, says Ramesh Ponnuru, a senior editor for National Review as reported in Bloomberg.
Tax reform should move us in the direction of taxing consumption rather than saving and investment. It’s important to remember, though, that investments don’t just include stocks and bonds and factories. Tax reformers should pay at least as much attention to the most important investments in the future that most people ever make (savings for retirement and support of the elderly).
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