In response to:

The Joint Committee on Taxation’s Head-in-the-Sand Approach to the Laffer Curve

Cobranut Wrote: Nov 15, 2012 1:01 PM
The consumption tax, or VAT, has some advantages, as long as it REPLACES the income tax with a rate comparable to the prevailing average income tax rate, with a small exemption for each wage earner. There is one VERY BIG PROBLEM with implementing a consumption tax for which I've never heard ANYONE even propose a remedy. How will the current balances in retirement accounts, savings and investment accounts, HSA's, IRA's, and any other accounts that are either AFTER_TAX monies or TAX-EXEMPT monies, on which tax has ALREADY been PAID, be prevented from being DOUBLE-TAXED when that money is spent in retirement? The record-keeping of these accounts for DECADES to come, in order to refund any VAT paid upon withdrawal, would be a nightmare.

I’m a big believer in the Laffer Curve, which is the common-sense proposition that changes in tax rates don’t automatically mean proportional changes in tax revenue. This is because you also have to think about what happens to taxable income, which can move up or down in response to changes in tax policy.

The key thing to understand is that incentives matter. If you raise tax rates and therefore increase the cost the engaging in productive behavior, people will be less likely to work, save, invest, and be entrepreneurial. And they’ll figure out ways to engage in tax avoidance and...

Related Tags: Laffer Curve