In a world with saving,making an income tax a consumption tax would require the tax base to be _____.

Question

Quizplus · Accepted Answer

If the tax base is consumption, then savings are not being taxed. Therefore, the tax base would be income minus savings. This approach would ensure that individuals are only taxed on what they spend, rather than what they earn and save. Option A is not ideal because it would result in double taxation of savings. Option C is too broad because it would include investment, which could distort economic incentives. Option D is not specific enough and doesn't provide a clear understanding of the tax base.

In a World with Saving,making an Income Tax a Consumption