Proceedings of the 33rd International Academic Conference, Vienna

IS CONSUMPTION TAX REGRESSIVE? A LIBERTARIAN PERSPECTIVE

JIM FISCHER

Abstract:

Libertarians see a minimalist role for the state at best. That role should be limited to protecting liberty, or the ability of individuals to pursue economic opportunity. In doing so, the state provides the means for individuals to resolve contract disputes that inevitably result when one individual’s claim or pursuits conflict with another. To fulfill this role of administering justice, the state needs a revenue source. Traditionally, liberal democracies have allowed income tax to evolve as the prime source of revenue. This is difficult for libertarians, who see income tax as the theft of individual property by the state. Consumption tax is another option for financing the state, but it has been criticized as being regressive, and therefore unfair in its application. This paper challenges that assumption and makes the case that consumption tax, when applied as a retail sales tax at the point of sale, has inherent characteristics that make it progressive. As such, it overcomes the criticisms that libertarians find with income tax and make it a more acceptable alternative revenue source for financing the limited role of the state.

Keywords: consumption tax, income tax, libertarian, progressive tax, regressive tax

DOI: 10.20472/IAC.2017.33.013

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