Confessions of a Supply-Side Liberal

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Twitter Round Table on Consumption Taxation

In the storified tweets of this  "Twitter Round Table on Consumption Taxation," don’t miss the idea of ensuring that most consumption taxes can actually be collected even in a world of tax havens by having some level of earnings taxation that goes into escrow to pay consumption taxes that are documented by a smart card. In principle, the funds could come out of escrow at the point of sale, but I think it would encourage more saving and investment if people instead received a large tax rebate at the end of the year from their escrow account. One good aspect of this is that it gives people less incentive to evade the tax on spending.  

Charitable donations should also result in a rebate, since they are not consumption. And the funds in the tax escrow account should be transferable and bequeathable. The point is to put a floor under the amount of revenue the government gets up front.  

By the way, to read this Twitter conversation, you need to understand a little about a value added tax (VAT), which is a form of consumption tax common in many countries. The big administrative advantage of a value added tax is that it is collected all along the way during the production of goods, instead of having one big point of taxation that would be a big temptation to tax evasion. Here is a link to the wikipedia article on value added taxes.

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