Our current system isn't a flat tax so why are we discussing this?
Seems to me core to understanding what kind of tax system we actually have, especially if we intend to change it to a system that is actually a consumption tax instead of a combination that we currently have.
This is especially true, as many claim the flat tax is a consumption tax not taxing "income".
Seeimng that there are many viariants in tax reform all claiming to be consumption taxes, and the Congressional Research Service pointing out that even the current system has elements of a consumption tax. It behooves us to explore what really is a pure consumption tax system and what is not before we jump the shark and try to implement a true consumption tax system at the national level.
Our current system does not tax the value added at each level, it taxes income.
Certainly it does tax value added, in addition to many other elements in its tax base. For the current system is clearly a combination of taxation modes with elements of consumption taxes as well as elements of "income" taxes. The Flat Tax clearly includes taxation of wage income, and does not exempt that income that is saved, yet is claimed to be a "consumption tax", by many.
Is income equal to value added?
I behoves us to determine what actually constitutes a consumption tax, or the equivalent thereto, and what does not in determining what elements do equal value added and elements of consumption. That is true especially where so many, wrongfully or rightfully, want to claim there favorite tax reform to be "consumption taxes" to be associated with the political bandwagon for whatever it is worth.
| http://www.taxfoundation.org/files/rl33443.pdf Congressional Research Service Flat Tax Proposals and Fundamental Tax Reform
The Relationship Between Income and Consumption Although our current tax structure is primarily an income tax, it actually contains elements of both an income- and a consumption-based tax. For example, the current tax system includes in its tax base wages, interest, dividends, and capital gains, all of which are consistent with an income tax. At the same time, however, the current tax system excludes some savings, such as pension and Individual Retirement Account contributions, which is consistent with a tax using a consumption base. |
Although our current tax structure is primarily an income tax, it actually contains elements of both an income- and a consumption-based tax.This makes our current system a VAT?