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September 18, 2007

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Joan A. Conway

Consumption tax - taxes those that spend, and income tax taxes those that earn.

If one earns money, but hoards it, or finds tax-free-opportunities for investment favorble to the capitalistic system, or otherwise, such as foreign investment a la California Governor, Arnold Schwarzenegger's portfolio, which usually is available to the wealthy, then the government benefits, if at all, indirectly with the earner's diversion of his investment(s).

I don't believe it really acts 'progressively' in most cases.

But those that spend include all of us; it is therefore 'regressive taxation' and falls heavily upon the middle-class and the poor disproportionately.

When one spends, one churns the economy. When one earns, one engages in the production of services or goods.

They are not exclusive concepts and though they intercept each other, spending does not elipse earning for the high income earners as a rule.

They seek investment opportunities with their surplus.

Where the middle-class usually has a smaller degree of surplus to investment and the poor has no surplus.

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