Is a Consumption Tax Regressive?

One common objection to replacing the income tax with a consumption tax is that the latter is regressive. People with low incomes spend a higher percentage of their incomes than do people with higher incomes (unless, as is frequently the case, the former are retirees living off of their savings and the latter are young workers saving for retirement), ergo those with low incomes will pay a higher percentage of their income as taxes under a consumption tax scheme. This objection is fairly easily answered by, for example, exempting the first $X of each person's consumption from taxation. But let's suppose that this isn't an option.

So assuming that the percentage of income consumed is negatively correlated with total income, and assuming a flat consumption tax with no exemptions, the answer to this post's title would appear to be a clear "yes."

However, there is an as-yet unquestioned assumption here: that "regressive" means regressive with respect to income, and the ratio of a person's tax bill to his income is of paramount moral importance. But this is mere question begging---whether a person's taxes should be assessed in proportion to his income or to his consumption is the very issue in dispute!

A flat consumption tax may generally be regressive with respect to income, but by definition it is neither regressive nor progressive with respect to consumption, and it's not at all clear that the ratio of taxes to income is of greater moral significance than the ratio of taxes to consumption (nor, indeed, whether either of them is of any great moral significance).

In short, it is no more correct to say that a flat consumption tax is regressive because it is regressive with respect to income than it is to say that a flat income tax is progressive because it is progressive with respect to consumption.

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