Greenspan Mentions Consumption Tax

    March 3, 2005

Federal Reserve chairman Alan Greenspan says that a consumption tax could boost economic growth.

He spoke to President Bush’s Advisory Panel.

“You can always construct a degree of progressivity into a tax system. Probably the simplest way is to exclude certain items from the tax which tend to be disproportionately consumed in a lower bracket. You obviously could also do it with brackets,” said Greenspan.

“The big problem you have with consumption tax (is) what do you do about the consumption that is financed by old capital — capital that has previously been taxed. This is an issue which bedeviled the 1986 commission and it ultimately led to an abandonment of trying to resolve that issue,” he said.

A CBC article says, “Consumption taxes can take the form of national retail sales taxes or a value-added tax, imposed on the increased value of a good or service at each stage of manufacture and distribution and ultimately passed on to the consumer.”

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