Why doesn't the US have a consumption tax?

The obvious answer would be 'because it's unpopular with voters', but that really isn't convincing: no-one likes to pay consumption taxes (the adjective most associated with Canada's GST is 'hated'). Come to think of it, no-one likes paying personal income taxes, either.

But among OECD countries, it is only in the US where the architects of tax policy have not been able to set up a broad-based tax on consumption. I'm not even aware of a serious initiative to implement one - and it's not as though no-one in Washington is aware that consumption taxes have fewer deleterious effects on growth than do taxes on income.

The removal of consumption taxes from the policy mix means that discussions about the effect of tax increases in the US are distorted. After all, if instead of asking "What will happen if we increase taxes?", you ask the question "What will happen if we increase taxes that we already know to be most harmful to economic growth?", you're not going to be greatly surprised if the answer is - as Romer and Romer recently find - that the effect is to significantly reduce economic growth rates.

Comments

[Bill Briscoe]

What do you mean there is no serious initiative to implement a consumption tax in the US? That's what the fairtax is all about. Three hours of radio per day on major city's most listened to stations are devoted to discussing the fairtax. Gov. Huckabee is running for President on the Fairtax platform. There are several congressmen and senators already signed on to promoting the Fairtax. Check it out: www.fairtax.org

[Stephen Gordon]

I said I wasn't *aware* of one. I must admit to a less-than-comprehensive knowledge of the US policy landscape...