[hripka]

How can both be true? Consumption will fall and income will rise

The savings rate will rise.

[Final Authority]

Savings rate is not income. If savings only can buy highly taxed products then there is no incentive to save but to spend anyway. If one could save expecting lower taxes when savings are spent, then that would be an incentive.

With respect to savings, or retirement set-asides, what is certainly true that under a consumption tax the tax rate will be higher than if there was an income tax only.