"How can both be true? Consumption will fall and income will rise. If all capital goods are taxed as consumption, such as homes, cars, trucks, and the machinery of commerce, and if people don't buy those items because of the tax burden, then why would anyone spend to increase production, and, if production is curtailed, how can incomes grow?"
One expectation is that American products become much cheaper to get to our export docks and therefore much cheaper for other nations to import. Our inport/export defecit is suppose to change radically as more businesses move production to the US. So if there were to be any loss in American consumption, our exportation of products would still drive demand for workers. Workers in demand drives price up as the supply is reduced.
Based on what you wrote, if there is a consumption tax, you say that the demand for products produced in the USA will go up because we will export more, because the price (cost of production) will go down. But in the same thought you write that it will cause income to rise. How can both be true? How can we have both lower costs of production and higher incomes based solely on the establishment of a consumption tax? If the tax take is the same, if one compares the income tax to a consumption tax, then, where did the money come from to pay workers more if the cost of goods goes down?
BTW, explain to me how Chinese and Mexican, or Costa Rican companies will move factories to the USA for cheaper labor and lower production costs if the incomes of the workers go up and when the government's total tax burden remains the same?
"So if there were to be any loss in American consumption, our exportation of products would still drive demand for workers. Workers in demand drives price up as the supply is reduced."
It's a little more subtle than that. The initial decline in US consumption would have two components:
1. a substantial decrease in the consumption of imports, combined with
2. a smaller magnitude increase in the consumption of US produced goods.
IOW, it isn't just foreign demand for US goods that would increase; domestic demand would go up, also, even though total overall consumption would initially decline.
However, the rate of growth in consumption would be greater after that initial decline, owing to a faster growing economy. By about the 4th or 5th year, total consumption would have caught up to where it would have been under the old system and would be positive from that point forward.