consumption tax

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Consumption tax

Consumption Tax

A tax only on income that one spends on goods and services. A common example of a consumption tax is a sales tax. Most countries have consumption taxes at some level and proposals exist in the United States to shift from a mainly progressive tax system to a system that utilizes consumption taxes predominantly or exclusively. Proponents of a consumption tax argue that it encourages saving and makes the economy more efficient, while opponents maintain that it adversely affects the poor, who must, by necessity, spend more of their income.

consumption tax

A tax levied on individual commodities or services and included as part of the retail price of those commodities or services paid by consumers. For example, a 25¢ tax levied on a pack of cigarettes is a consumption tax. Consumption taxes are advocated by many people as an inducement to increase savings in the economy. These people argue that the present taxation of income penalizes savers and rewards spenders. Compare excise tax, value-added tax.
References in periodicals archive ?
They design an experiment in which subjects vote for either a mixture of income and consumption taxes, in which the consumption tax is fully enforced and the income tax is not enforced at all, or an income tax scheme that cannot be enforced.
The imposition of those consumption taxes, however, would launch a series of likely adjustments to price levels, debt, and other asset values and interest rates, all dependent on Federal Reserve reaction.
One way to see that a flat tax is closely related to the other consumption taxes is to note that the flat tax is essentially a two-part VAT.
"All of these proposals are consumption taxes and thus have tremendous potential to improve our economy by increasing savings," said Martin A.
Unfortunately, the general public is not well educated on the concept of consumption taxes at the Federal level.
There are, however, problems with consumption taxes that will have to be worked out.
Everyone who took Economics 101 knows that consumption taxes are regressive, because the poor consume a far larger proportion of their income than the rich.
Accordingly, when considering the burden of indirect taxes on households, it is necessary to take into account the burden of excise taxes in addition to that of consumption taxes by income class.
flat-rate income and consumption taxes treat risky returns and economic
Stated another way, early consumers will have less income over their lifetimes (i.e., less earnings from savings), which would affect lifetime income taxes, but not lifetime consumption taxes. Thus, the perceived benefit of a consumption tax versus an income tax is its ability to increase savings and investment.
Consumption tax revenues jumped 88.6 percent to 558.77 billion yen as companies are now obliged to pay consumption taxes to the government in September and 10 other months a year from four times a year previously, a ministry official said.
The value-added tax in Europe and state sales taxes in this country prove that consumption taxes can be accepted.