and +Ronnie Ruff
What I meant, is that wealth and capital are generated from savings and production.
It is just a basic economic fact that when you subsidize something, you get more of it. Likewise, when you penalize something, you get less of it. Overall policies right now (not just through the tax code) subsidize spending and debt and penalize savings and production.
So the reason I say a consumption tax is currently superior to a production tax, is because America currently has over consumption and under production. This is evidenced by both the negative balance of trade and the sheer levels of public and private debt.
I acknowledge the argument though, that a consumption tax is perceived to be less fair to the poor, as they use a higher percentage of their income for basic consumption. I think this could be offset by exempting essential items like food and clothing from the tax.
As for the notion of a consumption tax being a huge benefit to the rich, I believe that to be the bogus argument. If the rich are not consuming, then what are they doing with their money? If it's just sitting there collecting dust, they aren't enjoying it anyway. As soon as they go out and buy their Ferrari or their golden toilet seat or their private jet, they will pay the consumption tax on their purchase. The difference is, unlike a production tax, there will be no loopholes or fancy accounting to avoid the tax. It will just be paid at the point of sale. They will probably end up paying more. If instead they save the money and later use it for production and capital, it will be helping to improve the overall economy and create jobs and opportunities for the rest of society.