Greenspan Suggests Hybrid Tax System

    March 4, 2005

Fed Chairman Alan Greenspan said that the U.S. should create a “hybrid” tax system.

This “hybrid” tax system would tax income as well as personal consumption.

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.

Specifics of the consumption tax were not discussed.

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