Read this great threat at TMPCafe for information about why — including the most enlightening comments. Also, for all Democrats who desperately need to brush up on this issue before the GOP blitz, here’s a great site: TaxWisdom.org
Paper towels: One roll for 99 cents, 3 for $2.50. If you can buy three rolls right now, you get 50% off the third roll. If you only have money for one roll, you don’t get that discount.
Credit: The less you need the credit, the less of a risk you are to the lender. Say you keep a credit card “for emergencies.” Say you’re honest about that, you really don’t buy dinner out on the thing, you really don’t even use it. A poor person can expect, of course, to pay a higher interest rate on carried balances. But, also… they can expect to pay a $6 a month “membership fee” or some such nonsense.
Services you don’t think about: Say you’re well off, you bought a new car recently, and it breaks. It’s got a warranty. You take it the dealer. The apologize profusely. They fix the thing. While they’re fixing it, they get you a rental car. You’re a AAA member and AAA gave you a free tow to the garage. You’re inconvenienced, but not out much but time. Same thing happens to a poorer person: You drive a used car, no warranty. Nobody comps you a rental car. There’s no spare car at home for you to use. You just shelled out for a tow. Maybe, you’ll pay extra for a rush job on your car, you need it to get to work. Oh, did I mention it’s a used car? The mechanic says he hasn’t seen one like this in awhile. And that means he needs to order parts….
A consumption tax creates an incentive to save. This is generally good, but what happens when the wealthy actually start saving more? Tax receipts drop (at least temporarily). So how does the government meet it’s obligations? Either it borrows more (god forbid) or it raises taxes. And who pays the raised taxes under a consumption tax? People who are spending–i.e., the people living paycheck to paycheck. For all the theoretical reasons a consumption tax might be good, I think in practice it will simply result in the tax burden being transfered to the poor.