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Politics : Bill Clinton Scandal - SANITY CHECK -- Ignore unavailable to you. Want to Upgrade?

To: dougjn who wrote (5082)	9/23/1998 8:34:00 PM
From: Peter O'Brien	Read Replies (1) \| Respond to of 67261

Elimination of taxation for cap gains, interest, and dividends wouldn't completely address this problem. Why? Let's say the savings was just cash sitting in a money-market fund. When the switch is made to a consumption-based tax, only the future interest earned will be tax-free. But at the time the switch is made, the entire balance of the money-market fund to that point in time was funded by savings on income that had already been taxed by the earlier income tax. Now, if the person wants to spend that money, it seems unfair that they should also have to pay the new stiff consumption tax that is meant to replace the income tax that they have already paid! I like the general idea of a consumption tax. Unfortunately, due to this problem, it seems like it would need to be phased-in gradually. Perhaps another solution would be to exempt people from the new consumption tax if they can document that the money they are spending comes from savings that pre-dates the consumption tax (this is a bookkeeping mess, though...)