"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.
The savings rate will rise.
"How can both be true? Consumption will fall and income will rise."
"It was not consumption that gave China its miraculous growth rate but investment, which reached an astounding 44 percent of GDP."
p. 61. "Three Billion New Capitalists - the great shift of wealth and power to the east", Clyde Prestowitz.
Prestowitz does a great job of explaining the historical foundation for our economic policies which encourage borrowing, spending and consuming and the dangers we face if we continue with outdated policies in the 21st century.