Princeton economics professor Alan Krueger offers a national sales tax as a path to prosperity. The key bit:
Here is a suggestion to address both the short-run and long-run problems. I pose it only as a suggestion for serious discussion; I’m not sure it is the best way to go. But here goes: Why not pass a 5 percent consumption tax to take effect two years from now? There are many different ways to implement a consumption tax, but for simplicity think about a national sales tax.
So he prefaced it by saying it’s only a suggestion. It’s a path to prosperity that should be so obviously doomed to failure that an economics professor would trash it before submitting it to an editor, but still, the caveat is there. He continues:
In the short run, the anticipation of a consumption tax would encourage households to spend money now, rather than after the tax is in place. Along with the rest of the economic recovery package, this would help jump-start spending in the economy and thereby increase production and employment.
Just like the federal government, consumers can create prosperity by spending more. Somehow, defined as shifting spending from a post-tax world two years from now presumably to today’s pre-tax world. This is an interesting theory, but let me ask a question: If you know a 5% tax looms two years from now and you have a significant purchase planned more than two years from now, is that going to shift your spending to today? Or will it shift your spending to 1 year, 364 days from today? The two year window is pointless to get the economy rolling today, if we’re working under the silly notion that a tax increase will grow the economy.
Also, if you shift that spending from some date more than 2 years in the future to 1 year, 364 days in the future, have you increased (i.e. “jump-started”) consumer spending, or have you shifted the same spending around in time? Will this shifting in time increase production temporarily or permanently?
Notice, too, that the entire argument is built around the false assumptions that we need not question government spending and that tax increases have no negative effect on an economy.