Would you rather pay taxes on your earnings or on what you consume?
Sen. Ben Cardin (D-MD) says that consumption taxes—instead of income taxes—are a better way for the federal government to take in revenue.
Consumption taxes would encourage people to save money, and would be more in line with tax codes of other industrialized countries, Cardin said at a meeting of members of the Greater Bethesda-Chevy Chase Chamber of Commerce on Monday afternoon.
"To reform the tax code, there are not a lot of options available," Cardin explained.
"I think we should substitute a significant part of [federal government] revenues with consumption taxes rather than income taxes." Cardin envisions consumption taxes at or close to 15 percent, no income taxes for those earning less than $100,000 a year, and a simplified tax code—with only a handful of deductions and only a few rates.
For those on the lower end of the income scale, immediate rebates would be available upon paying consumption taxes.
Still, some might argue that consumption taxes could unfairly burden lower-income taxpayers, but Cardin says that "we can take care of the fairness issue."
"I will not submit a proposal that incurs a higher tax burden on middle-class families."
Of course, serious debate about substituting any part of federal income taxes with consumption taxes is not about to happen at any time soon, but Cardin hopes that discussion could begin in Congress in a couple of years.
pretty hard for this proposal," he said.
The consumption tax model has "worked in just about every industrialized nation in the world," and would "[allow] our country to be more competitive than it is today."
The "idea is to reward savings. ... We have the strongest economy ... huge annual increases in income, but negative savings. We spend more than we earn," Cardin said.
Do you agree that consumption taxes could be the way to go in reforming the country's tax code? Tell us in the comments.