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Originally Posted by gcbrowni
VAT taxes don't work. We don't want to discourage consumption, we want to encourage it; it's what drives the US economy. It also hits poorer people worse than the rich, since a larger portion of their income would go towards taxes. It would also be hard to make exceptions for the poor since it's hard to eliminate the tax at the register on an person by person basis. The current income tax system handles this by simply not taxing the poorest segment of society.
We have a pretty simple progressive system now for individuals. The monkey wrech is the deductions. The Feds encourage and discourage certain behaviour by taxing it at different rates. This tweaking of the system is what adds the complexity to system, and is also its greatest strength. People tend to gravitate towards the things that make the most financial sense; the government recgnizes that and tries to push the nation in certain directions based upon that fact.
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I think we really want to encourage work, savings and investing. We have to make sure people are incented to do that. And, people should pay the true costs of things rather than shifting and hiding the cost.
Also, if we could come up with a reasonable way to tax consumption you actually tax the underground economy. You also tax the wealthy in a more fair way. Example, Bill Gates of Microsoft, one of the wealthiest people in the USA pays himself a salary of about $250k, we know based on his lifestyle he consumes more than $250K of goods and services, but because of our tax code he can hide his expences through his corporation(s), foundation(s), trust(s), and hiring the best tax people. The CEO of Cisco Systems was paying himself $1/year for a number of years, but I bet his lifestyle was one of a billionaire.
Middle class and poor people are at a clear disadvantage and don't even know it. Increase taxes on the rich and it is meaningless. They pay what the want to pay.