IS CONSUMPTION A RELIABLE SOURCE OF REVENUE?
Yes, in fact, consumption is a more stable source of revenue than income, as shown in Figure 3. The chart compares the yearly changes in the tax bases for the income tax (adjusted gross income — AGI) and the FairTax (personal consumption expenditures — PCE) for years 1974 to 2004. PCE has always grown from year to year, whereas AGI dropped from 2000 to 2001 and from 2001 to 2002 — two years in a row. The higher growth rates of AGI in boom years result in overspending and then when the economy slows down either budget cuts are needed or, what is more often the case, taxes are raised or the budget deficit increases.
Yes. In fact, consumption is a more stable source of revenue than income. When comparing the yearly changes in tax bases for income tax (adjusted gross income – AGI) and the FairTax (personal consumption expenditures – PCE) for years 1974 to 2004, PCE has always grown from year to year whereas AGI dropped from 2000 – 2001 and again from 2001 – 2002. The higher growth rates of AGI in boom years results in overspending and then, when the economy slows down, either budget cuts are needed, or, more often, taxes are raised or the budget deficit increases.
