Home > Tax Policy > Taxing The Way You Like It (Or Hate It Least)

Taxing The Way You Like It (Or Hate It Least)

Economists Laurence Kotlikoff and Andrew Weiss come up with a plan to let people chose the way the government taxes them: on income or consumption.

We propose a tax reform — and Lord knows we need one — that recognizes this equivalence. Our plan taxes all retail sales at a 17.5 percent rate. But if you don’t want to pay the retail sales tax, you can pay, up front, a 15 percent tax on your wages and wealth. Every dollar of tax you pay up front gives you an electronic sales-tax credit, for use when shopping, which exempts $1 of consumption from the 17.5 percent retail sales tax. Unused credits grow with interest, so you aren’t penalized by waiting to spend.

As with all tax reform ideas that seem to have any promise of actually altering incentives in a positive way (a flat tax, for example), I fear the greatest resistance won’t come from people with a better idea, but from those with so much invested in keeping things the way they are.

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Categories: Tax Policy
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