An Analysis of Senator Cardin’s Progressive Consumption Tax

Senator Ben Cardin (D-MD) proposes to dramatically scale back the individual and corporate income taxes. Most people would no longer owe the individual income tax, and the corporate income tax’s rate would drop below the average in other countries. Senator Cardin would finance this with a value added tax, which he calls the Progressive Consumption Tax (PCT). Large rebates would make the overall package progressive. According to the Taxes and Growth Model, the Cardin plan would be pro-growth. This is because the individual and corporate income taxes are biased against saving and investment while the PCT would be saving-consumption neutral.

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