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The Case for a Progressive Spending Tax

Edward J. McCaffery
Publication date: 
Fri, 29 Aug 2008

A traditional view of tax that viewed consumption taxes as a way to avoid taxing savings is flawed. A progressive spending tax stands between an income tax, which double-taxes all savings, and a wage tax, which ignores all savings. 

A progressive spending tax implements simultaneously two widely held norms about savings: the ordinary-savings norms, which holds that savings for emergencies or to smooth out uneven labour earnings through even consumption paths is commendable and ought not be ‘double-taxed’, and the yield-to-capital norm, which holds that savings that enable higher material lifestyles ought to bear some tax.