Another issue is owning a house. I suppose you don't pay consumption tax when you buy a house as it is an investment. However, I think consumption tax should be charged for the rent you pay to yourself. That means if you live in your home, the government would assess a rent and then you need to pay the consumption tax based on that rent.
ymc, I can only speak for the Fair Tax proposition, because that's the one I like and have studied. Only end consumers have to pay it. The idea is transparency (since end consumers end up paying all the taxes on a product anyway). A house would be taxed one of two ways: If sold new, it would be taxed at the full value. If the owner built it himself/herself, the materials and purchased labor would all be taxed as the house was being built. (Contractors buying material would just have to present identification to have the Fair Tax taken out of their purchase price.) Houses would not be taxed when resold. (The theory is that the one-time tax would become part of the house value, much as VAT becomes part of a product's value in Europe.)
Do you think a self-rental tax is needed? If I remember correctly, you also tax people when they pay rent. If that's the case, shouldn't that cover self-rental as well?
r35352 has been absolutely correct about all of his views, especially on a flat tax. The idea of a flat tax would be very, very bad for the majority of the American populous. If you are not rich, and if you like the idea of a flat tax, then you have been deceived by rich people who support flat tax. Deceived into thinking that it's a good idea for you and for America. Flat out deceived.
I'm totally for a consumption tax. People say that the rich would just park their money in investments. Hey - that's great - greater investment drives economic growth. Exempt necessities (such as most grocery food items but not high-end grocery food or convenience store items), generic perscriptions, low-cost furniture and things from K-Mart. Other goods get a sales tax based on the cost of the item or it's status as luxury. Now you have a system that's fair and can't be cheated. It's progressive - and you reward people for being thrifty. Those who care about holding on and saving money (i.e. cheap) can do so. Those who are extravagent can pay the premium (which amounts to the same they would pay in taxes). Those who want to shelter their funds can do so. It will be enough, because you just adjust the tax rates to make it enough. At the end of the day, you are taxing those who have the most disposible income, you lower consumption, and you reward savings. That's a great formula for economic success, and I think you'd be very popular for eliminating the income tax. Of course retailers might hate your guts.
A problem with consumption tax is that people might want to import luxury goods from other countries. How do we prevent people from importing jewelries for example? Do we need to inspect every package that is coming in?
