" -- President Bush's tax-overhaul panel agreed to offer two alternatives to the present tax code: one that streamlines the current income tax and another that would replace it with a progressive tax on consumption. "
Tax Reform PING
Big question -- what is tax on "consumption"? VAT would be terrible, retail sales tax, fair tax good -- but what is this "progressive" bit?
Progressive simply means varies in effective rate with the amount subject to tax grows.
In the income tax case, income grows and the rate at which income is taxed grows with the amount of household income. The so-called Flat Tax is progressive due to the personal exemptions it implements.
The FairTax implemented in HR25 is an example of a progressive consumption tax due to the FCA sale tax rebate paid to all households.
All tax on expenditure up to the povertylevel is covered by the FCA. Thus its "effective" tax rate for the household increases with the amount of dollars spent for consumption.