People seem to be having a hard time with the consumption tax argument. I may be completely wrong but here's how I interpret it: 1. Like income tax you have va

People seem to be having a hard time with the consumption tax argument. I may be completely wrong but here's how I interpret it: 1. Like income tax you have various 'bands' 2. The more you spend/consume they higher the band you are in 3. Lower bands pay less 4. Someone with little money buying just the essentials consumes e.g. $10,000 per year. Band 1 (a tax of say 10%) starts above $10,000 and thus this person is exempt. 5. If you buy Ferrari's, mansions etc. and consume $5m per year you would be in one of the higher bands and would pay a higher tax rate (say 40%). In other words the little people keep all their money as it's only spent on essentials. People who have disposable income pay back a percentage of what they spend. Your argument that it would discourage spending and be bad for the economy is fine but I don't think it would hit as bad as you think. Say I can afford to spend $1m on a car but because of the 40% consumption tax it will actually work out as $1.4m at the end of the year will I still buy that car? Chances are that $0.4m isn't a big deal to me. Sure I might not like it but I probably have enough disposable income that I'll pay it. The key is getting the tax bands correct so that your disposable income is still high enough that after the tax you will still buy the item. You will have less purchasing power but the money going into the tax system could be used to offset the decline in economic growth.