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Any Tax Reform Should Raise Revenue and Growth

Consumption tax can raise enough revenue to help with debt and create growth.

 

Baby Boomers are now in full retirement mode. The aging population means more government spending and as government grows national economic growth slows.

It is predicted to grow only 2.2 percent over the next few decades. It grew 3.2 percent a year for about five decades after WWII. We need tax reform that will raise revenue and help boost the economy.

Current proposals lean towards closing tax loopholes and raising top tax rates. The problems with this paradigm are that the revenue raised would not be enough to cover the trillions in new debt and at the same time would deincentivize growth. This process has the potential to reward consumption and punish investment and savings.

Perhaps we can leave tax rates and loopholes alone and address our economic problems by taxing consumption. I don't believe that the upper or middle classes would have major concerns wiith this type of trade-off. If there is a problem it rests with the lower income population who when consuming would spend a larger share of their income than the rich.

As it stands now lower income people pay no income tax, most receive welfare, food stamps and other assistance, yet many purchase large ticket items i.e., wide screen TVs and luxury autos.

A consumption tax might encourge people to save some money and at the same time enable top earners to invest, reinvest in business and hire folks thus creating growth.  

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

Jac Charlier January 01, 2013 at 05:42 PM
Ray - Can you please tell me what is your citation/reference for your statement. "As it stands now lower income people.... many purchase large ticket items i.e., wide screen t.v's and luxury autos." Thank you and Happy New Year!

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