Massive Distortion

clipped from www.forbes.com The focus on consumption complements the proportionate tax. The current stress on taxing income creates a massive distortion against private savings, which are always subject to a second round of taxes. Right now, people tend either to consume wealth or to invest it in art and similar assets whose appreciation falls outside the tax system until the time of sale. The flat consumption tax removes the incentive for excessive consumption by assuring individuals that their savings will not be taxed. People are thus better able to smooth their income over time, so that a constant number of dollars generates higher levels of personal utility. By this standard, estate tax counts as the worst form of tax on savings. The wealth in question has already been taxed as income on receipt. The incidence of this tax on capital is wholly haphazard. People with long lives are twice-blessed because they can beat the tax in multiple ways.