Why do we tax income rather than consumption in the US?

Answer 1

Americans have long believed that an income tax with progressive rates (i.e. the more you make, the higher your tax rate) is the fairest tax. A "sales" or "consumption" tax is essentially the opposite - it's a regressive tax. Lower income individuals typically spend a larger percentage of their disposable income than higher income individuals. Thus, with a consumption tax, a lower income taxpayer pays a higher percentage of their income in taxes.

Answer 2

We tax both--we tax consumption with sales taxes, excise taxes, and property taxes. We tax income with income taxes.

If we wanted to fund government spending totally with sales taxes, we would need a VERY high tax rate. This would make the poor poorer as most of their income goes to consumption. The economy would suffer because, in effect, you'd be causing a huge inflation in the price of goods.

Sounds like a very bad idea to me.

Answer 3

Primarily because that make it easier to manipulate the tax code to influence behavior. Support the Fair Tax to replace the Income tax with a consumption tax.

Answer 4

Where I live they tax both. One at a Federal and State level,
then at the State, City, Franchise and local.

I think I still live in America, but it is starting to read like the old Motherland before the Tea Party

http://www.irs.gov/app/understandingTaxes/jsp/s_cool_stuff.jsp
goodluck

Answer 5

In the United States seems we tax everything from the time you are Born to the time you Die !
So we tax it all Brother .