I guess there is an issue with spending abroad, but otherwise taxing consumption sounds better than income, as it encourages investment.
If a progressive VAT tax was feasible, would it be better than income tax?
byu/standermatt inAskEconomics
Posted by standermatt
2 Comments
What you’re looking for is a [progressive consumption tax](https://taxfoundation.org/blog/taxing-consumption-progressively-tax-the-wealthy/). They are feasible and have been implemented some places. I believe, for example, Washington state taxes certain luxury goods at much higher rates than their general sales tax.
You are correct that there are a number of advantages, of which encouraging investment is one.
A progressive consumption tax has already been proposed. Ive seen it called the expenditure tax, but it amounts to a system where people file their incomes/consumption and allows them to deduct all savings/investment, effectively taxing only consumption.
This would be better because it wouldn’t distort investment and it would allow much higher taxes on the wealthy’s consumption.