I really like the idea of consumption tax, and most countries have a pretty serious consumption tax. It's called a value-added tax or a goods and services tax ... It's a sales tax. It doesn't tax labor, it doesn't tax savings or investment - it taxes consumption.
T.R. ReidIf your employer pays your health insurance, that's not counted as income to you. And any economist would say that's your income, because they'd pay a higher wage if they didn't take it. That's a huge loss to the Treasury.
T.R. ReidThe Value-Added Tax, a sales tax that applies at every level of business transactions, is an easy tax for governments to collect, and a hard tax to evade. So it makes the job of raising revenue easier. The revenues from the VAT can then be used to lower taxes on income and saving and investment. The Value-Added tax doesn't penalize work or saving; it's a tax on buying stuff.
T.R. ReidStarting in the '80s or so, after the United States sharply cut its rates, other countries decided they better do it too, and here's how you do it: you just wipe out the exemptions, the deductions, the credits, the depreciation allowances. And people complain, "Oh my God, it's terrible," but you give them much lower rates and you give them an easier form to file, and people accept that tradeoff.
T.R. Reid