Whether you are progressive, liberal, conservative, libertarian, or green, there is a tax plan that everyone can get behind, at least in principle. It also happens to be the kind of tax that economists will agree is the least damaging to the economy. Has your curiosity been triggered? Read on to find out.
Consumption is the Key
Amazingly, people of different ideologies agree on a critical metric for the success of their policies: Consumption. Environmentalists point out that the more we consume, the more we pollute and destroy natural habitats. National populists want to curb consumption from China and other countries that disregard the rules, while social liberals wish to minimize material inequalities. At the same time, some conservatives want to reduce certain vices, such as the use of alcohol or cigarettes.
Fortunately, economists know that the least damaging of all taxes is the consumption tax. Economists strongly discourage tax on capital, the workhorse of the economy. The more taxation can be delayed, the less damage it does.
Consumer Tax with Rebates
In effect, the ordinary consumer tax is flat. Everyone pays the same percentage, which is perhaps the most significant objection for those who demand that the rich pay a larger proportion than the poor.
This problem can be fixed with an individual tax rebate. Imagine every person in America having a consumer tax rebate account. Every month, a rebate of, say, $1,000 is added to your account. It allows you to spend this amount tax-free. Since every person with social security numbers would get such a rebate, a family of four would be able to spend up to $4,000 tax-free every month.
If you don’t spend your rebate, you can save it up for something more expensive, such as a car.