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Consumption Tax Possibilities

March 21, 1993

In the article "Consumption Levies: Pay if You Spend" (Feb. 10), you mention the thinking that consumption taxes place a disproportionate burden on the lower and middle classes. This assumes that a consumption tax carries a flat tax rate.

But why does a consumption tax have to be a flat tax rate? Can it not be a graduated tax? A graduated tax might work like this:

No tax on food, prescriptions, over-the-counter first aid, soap, detergent--things that the poor have to have.

Perhaps also no tax on items sold at thrift shops run by charities, leaving them more money for their work because of the savings on bookkeeping costs.

Jewelry would carry a higher tax than shoes. A $100 dress would be taxed at a higher rate than a $10 dress and a $1,000 dress at a higher rate than a $100 dress.

People on business trips have to eat out, so coffee shops would be taxed at a low rate, but dinner houses would be taxed at a higher rate, with the tax going up as the price range within the restaurant goes up.

For the sake of families, theme park admissions would carry a low tax, but memberships in exclusive clubs would be taxed more highly, since people who can afford to pay thousands of dollars for such memberships could afford the higher levy.

Property taxes could be levied at increasing rates according to the square footage over a certain minimum. Pleasure boats could be taxed by tonnage, with the rate rising as the tonnage does.

Such a tax would be no harder to administer than the price controls instituted during World War II and under the Nixon Administration. There probably would not be many loopholes, and there would be the advantage of the tax being semi-voluntary, since a person could set his own tax rate by what he purchased.

No, rich people would not give up their yachts and clubs in order to avoid taxes; these things convey status, and status is a human need. In fact, being able to afford a high tax could become a status symbol in itself.


Santa Ana

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