Consumption is differentiated from investment in that consumption is stuff you intrinsically want, while investment is things you don't want except because it g

Consumption is differentiated from investment in that consumption is stuff you intrinsically want, while investment is things you don't want except because it gives you other things later. That’s fine, but as I've argued previously, almost any purchase can be argued to fit either description. People do actually buy e.g. fine wine as an investment. How will the IRS determine if a purchase is an investment or consumption? How can they produce more? They haven't devoted any physical resources to building that new factory or otherwise upgrading their productive capacity. Presumably they make a profit from selling the stuff. And maybe they produce less of the stuff that doesn't sell well. But how do you even get that from what I wrote? Consumption is not antithetical to investment. I am not arguing against investment. It's not clear to me if you understand that investing does not automatically create a market. All those Chinese ghost towns we hear about are the result of investing in something for which there is no market. This is completely NOT the point. In that case I apologize for misunderstanding you. Still, it's an empirical fact that taxes act as a disincentive. And you would need to tax consumption very heavily if it were to replace current forms of tax. A large part of the population would simply not be able to afford anything but the bare essentials (if that) let alone have any money left for investment. Read the Scott Sumner link I provided above. I enjoy our discussion, but I am not interested in reading someone else make your argument for you. The point is that a capital income tax penalizes consumption in the future relative to consumption today. A consumption tax treats them equally. I am sure that's true, but so what? It's such an arbitrary point to make. It doesn't point towards any real world problem that we are having. The economic challenges that faces us today are not caused by people consuming too much today and saving too little for the future. Quite the opposite in fact. There is also no indication at all that there's any lack of risk seeking capital. It's never been easier to get funding for a new venture. In fact there are sign that it's become almost too easy, and that investors are taking on too large risks in order to get a return.