Thursday, March 03, 2005

Greenspan Voices Support For Tax Changes

Alan Greenspan says he supports a change in the tax code to turn it into a consumption tax rather than relying on income taxes. He was speaking to an advisory committee to the President on Thursday:

::::::::Greenspan pointed out the merits of a "consumption" tax, as well as the challenges of setting up such a tax. Consumption taxes can take the form of national retail sales taxes (search) or a value-added tax, imposed on the increased value of a good or service at each stage of manufacture and distribution and ultimately passed on to the consumer.

"As you know, many economists believe that a consumption tax would be best from the perspective of promoting economic growth — particularly if one were designing a tax system from scratch — because a consumption tax is likely to encourage saving and capital formation," Greenspan said.

"However, getting from the current tax system to a consumption tax raises a challenging set of transition issues," he added.

You can say that again. There's considerable resistance to enacting such a tax ranging from special interests who would see their revenues drop as a result of their contributions no longer being tax deductable to those who say such a tax would overburden lower-income families. It's an idea that, as I have said in the past, deserves some thought and reasonable debate.