A tax only on
income that one spends on goods and
services. A common example of a consumed-income tax is a
sales tax. Most countries have consumed-income taxes at some level and proposals exist in the United States to shift from a mainly
progressive tax system to a system that utilizes consumed income taxes predominantly or exclusively. Proponents of a consumed-income 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.