Everyone has to consume. Consumption is a necessity, and is unavoidable (and therefore unevadable). Some level of taxation is required since it determines the level to which government can spend without devaluing the currency, and it's also a tool that can be used to drain money out of the economy. But it's not required to "fund" anything -- what you want out of a tax is one that allows you to apply policy effectively. Putting tax legislation in place and enforcing it are two very different beasts. Having a consumption tax with sufficient offsets for low income earners is far less likely to result in evasion because everyone must consume, and no-one will refuse being GIVEN money (income tax is sort of the opposite: we don't tax consumption, but we tax income and try to tax high income earners more, which they do their best to evade; low income earners would never "evade" their transfer payments).

Prices and spending habits will adjust accordingly -- you're giving people a huge tax break in one area and adding a burden in another. There wouldn't be any impact on aggregate demand, but fiscal policy would be much easier to implement.

Video on how this works: https://www.youtube.com/watch?v=i35uBVeNp6c

Book on how this works: http://www.amazon.com/Modern-Money-Theory-Macroeconomics-Sov...

Another way to put that is that it would encourage saving and investing. In the long term, that's better than encouraging spending, since the money would go towards growing the economy. (Assuming it isn't invested in beanie babies and lottery tickets.)

Minus what seems to be a bizarre loss of website data this weekend, I've always been a fan of a national sales tax, with all associated exceptions where it makes taxation less regressive.

http://fairtax.org