The Case for a Spending Tax
As never before, the U.S. income tax system is under attack.
Almost no one seems satisfied with the way it works, com-
plaining that it is overly complex, unfair, and inhibits economic
growth. In spite of this widespread dissatisfaction, what ex-
actly should be done about it commands much less agree-
—Joel Slemrod and Jon Bakija, Taxing Ourselves: A Citizen's
Guide to the Great Debate over Tax Reform
WE HAVE SEEN THAT A CONSISTENT INCOME TAX IS A BAD idea in theory. Further, an inconsistent income tax is a horrible reality. We should drop the foolish attempt to tax savings directly, and adopt a consistent consumption tax.
We are almost ready to grasp the argument for moving to a quite particular alternative, a consistent, progressive, postpaid consumption, or spending, tax. But on the way to recommending this Fair Not Flat Tax, I will add a final—and hopefully clinching—argument to the general case for consumption taxes: They're what everybody seems to want.
This is hardly obvious at first. Anyone listening to the calls for tax reform in postmillennial America might think that they are all just so much noise. Everybody hates the income tax. Almost everybody hates the 1RS. But beyond these obvious truths, it is hard to say much about what the public thinks. Everyone seems to have a more or less realistic plan for fixing the mess we're in. Politicians