Why We Need a Consumption Tax

News of the Day,” Macroblog, 31 March 2005, http://macroblog.typepad.com/macroblog/2005/03/news_o_the_day.html (from The Glittering Eye).

Because this personal fiscal insanity has to stop

Personal spending rose 0.5 percent in February while incomes rose a less-than-expected 0.3 percent, the Commerce Department said today in Washington. The Labor Department said today the number of Americans seeking first-time jobless benefits jumped in the last weekly tally before tomorrow’s monthly jobs report.

Again spending rose faster than savings. This is great for Keynesians, but in the real world this retards growth and weakens are international position. Americans are literally selling out the future at steep discounts. A consumption tax would punish spendin, not earnings and not savings, and give us a sustainable economy.

Likewise, isn’t it great being a hostage to the Middle East?

Crude oil rose and gasoline and heating-oil surged to records on signs that U.S. refineries lack capacity to make enough fuel and Goldman Sachs Group Inc. analysts predicted that oil could touch $105 a barrel.


It’s equally likely that oil will touch $105 or $15 a barrel,” said Jason Schenker, an analyst with Wachovia Corp. in Charlotte. “It’s not going to $105 without a major cataclysmic terrorist attack on significant oil infrastructure. It’s not a rational expectation.”

A geogreen strategy would take pain today, in the form of consumption taxes on oil, to avoid this randomness tomorrow. Oil revenue makes bad regimes horrible and fair regimes crooked. The oil system is lose-lose.

So we have two bits of bad news. Why not combine them?

Record prices have failed to curtail surging fuel consumption, the Goldman Sachs analysts said in a research note. The firm’s upper limit was $80 previously. U.S. supplies of gasoline and distillate fuels, such as diesel and heating oil, fell last week, according to an Energy Department report yesterday.

Great. We need a step enough oil tax to divert the excess revenue out of sheik’s pockets. If it would go to the treasury, fine. If it would go to a special fund, fine. But we cannot keep this us.

4 thoughts on “Why We Need a Consumption Tax”

  1. here is my idea on the Consumption Tax and how the republicans can get there mojo back
    do you do the right thing – not smoke, eat right, go to school, not break the law, try to recycle
    if you do these things and are poor that a problem for me
    ask the average joe and the American people do the go to work and pay taxes to support people
    who smoke, don’t eat right (see the movie supersize me – think of the extra heath cost (soon under obama
    tax cost),dont go to school,etc
    its time for people and American people to pay based on results and stop living beyond there means and having the
    average hard working American pay for it
    my plan
    keep the income tax on people above 125,000 or so – that’s just a number i picked it can be debated and go up or down
    then get rid of all other taxes – people and corp
    then have a consumption tax on bad things
    no tax on non processed food and recycled items, other good things that society can decide on.
    tax fast food, smoking the most (i personally would legalize drugs (expect under 21, get caught selling or giving to kids life sentence) and taxes them the highest (call it the new death tax – to pay for there death and heath care cost) and require you to show you have 40 hr a week job to support the habit – because you never going to stop someone from using that wants to)
    tax the rest of products a normal rate
    instead of having a jail system like today for nonviolent offenders have weekend workcamps – if you steal or have a dui work weekends for a couple years (like 10 to 15) on a farm – that will have end illegals – if the farms and other low paying jobs are done by lawbreakers than the demand for illegals will dry up and stop both it and crime.
    industry that provide high paying jobs (like auto that make high mpg cars) that we want here in the USA – don’t tax what they sell or what the buy to make the product
    from the taxes from smoking, fast food, other consumption products give a reward for completing school or training for a new job
    you the average Joe that does not smoke, eats rights, recycles and goes to school will pay less and have a better life
    the coming baby boomers that are going to live the work force is going to mean either we start rewarding for recycle and doing the right things or lower are stardered of living

  2. James,

    Thank you for your comment.

    Your plan approaches social engineering — some set of behaviors are considered to be wicked, and those are taxed at a higher rate.

    The consumption tax I proposed is to increase investment generally. If someone wants to engage in a dangerous sport like marathon running [1] or eat fast food, that is his decision …. I’m not comfortable with the government trying to engineer it away.

    I want to live in a free society..

    [1] http://www.halfsigma.com/2007/11/marathon-runnin.html

  3. I agree with James as well, that all Americans need to stop spending beyond their means. In these tough economic times it may be wiser for consumers to pay their taxes on what they truly need.


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