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Is it time for the United States to consider switching from income tax to a progressive consumption tax as a way of addressing growing wealth inequality?U.S. Sen. Elizabeth Warren has proposed an ultramillionaire tax on the 75,000 wealthiest American households, which would amount to a 2 percent annual wealth tax for those with more than $50 million, rising to 3 percent for billionaires.However compelling the moral case for a wealth tax may be, it has historically proved difficult to garner large revenues from it.Why not target the same aims with a better system that enjoys broader support and will therefore prove more enduring?A consumption tax (which is not a sales tax, but rather uses similar information to that required by the existing tax system) is simple and elegant, and could save a couple hundred billion dollars a year in deadweight accounting costs. Importantly, these plans contain a large exclusion so that lower-income families pay no tax at all.Until now, it has mostly been a smattering of Republicans who have favored switching to progressive consumption taxes (though a variant was championed by the liberal icon Bill Bradley, a former U.S. senator from New Jersey).
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