There's certainly something to this plan. My main concern would be whether the government could credibly commit to a future tax increase. It's like promising yourself you'll go on a diet starting tomorrow...err the next day. Unless consumers really believe that a consumption tax is coming in a few years, they won't change their spending behavior."Here is a suggestion to address both the short-run and long-run problems. I pose it only as a suggestion for serious discussion; I’m not sure it is the best way to go. But here goes: Why not pass a 5 percent consumption tax to take effect two years from now?
...In the short run, the anticipation of a consumption tax would encourage households to spend money now, rather than after the tax is in place. Along with the rest of the economic recovery package, this would help jump-start spending in the economy and thereby increase production and employment.
In the long run, a 5 percent consumption tax would raise approximately $500 billion a year, and fill a considerable hole in the budget outlook. In addition, a consumption tax would encourage more saving in the long run. Many economists consider a consumption tax an efficient way of raising tax revenue, especially in a global economy. The prospect of greater revenue flowing into federal coffers would probably help lower long-term interest rates because the government would need to borrow less down the road, and further bolster the economy."
It would be interesting if Congress could put a stipulation on a bill like this that any amendments would require a 2/3 majority vote, or some other provision that would make it more likely that the law would actually stand when it comes time to pay up.
1 comment:
Danman - i think it would need to be 10 pct... cause otherwise id pay more in interest than if i bought it 2 years down the line.. but maybe he's not talking about people like me. I guess the biggest problem is those damn rich people who hoard all the money instead of spending it- that way their kids don't have to work and complain about the rates they get on CDs or something...
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