A modest tax policy proposal

America’s tax policy is a political football that is constantly being passed, kicked, tossed, lobbed, and generally beaten by every side in the debate.  I would like to make a modest proposal on a new form of tax policy that I am sure others have made before.  The point of this proposal is to incite discussion, and generate a path forward that will resolve our country’s financial problems.  I do not have all of the answers on how to implement this idea, nor should I. This is simply a proposal to begin an earnest discussion of the topic and come to paths of implementation.  All numbers are notional, only there to provide basis of statements, not as specific proposed levels to any one part of the system.

The idea is a simple one: a progressive consumption tax based on how much one (or a family) purchases in a given year.  Consider that a family that spends $60,000 a year would be taxed at a 2% rate on their consumption.  One that spends $120,000 would be taxed at 2% on the first $60,000 and 4% for the second $60,000.  Then, a family that spends $180,000 would be taxed 6% for the third $60,000, and so on-and so forth as high as the spending goes.  Each consumption increase beyond the next $60,000 threshold would increase the tax rate of that portion of consumption by 2%.  This can be done up to a certain level, where the tax on consumption would maximize at a given level, that for the sake of this paper we could say would be 36%.

In this way, a family of modest means that does not have the ability to consume would pay the least amount of taxes, but still be taxed on consumption up to the point at which it can no longer consume.  The family that can afford to consume more would pay more taxes for that consumption, all the way up the consumption scale.  In this way, work itself is incentivized, as is savings, and consumption is taxed based on how much is consumed. 

Certain exceptions in consumption can be included in this system to allow for medical expenses, groceries, and other necessity items to be consumed without counting against the total family consumption number. I will not specifically identify any other exceptions because that is a societal process to be achieved through discussion and decision based on the needs and values of our country.

I look forward to debate and discussion on this proposal.  Of particular interest would be how to implement it, how much revenue it could bring in as compared to the current system, what the appropriate percentages and consumption levels are, and any other ideas that this proposal spurs.