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The current debate on whether to replace the current income tax with consumption tax draws attention from many policy makers. In my opinion, income tax is better to the economy and fully replacing with consumption tax may be very risky to the economy. Fully adopting consumption tax regime would shift the tax burden to the poor who may not avoid consuming. The rich decide to avoid consuming high taxed goods which may end up reducing the amount tax collected by the government. Consumption tax is therefore quite risky as it increases chances for tax avoidance. However, I do not advocate for the use of only income taxes, but rather a mixture of the two. The government ought to adopt a progressive consumption tax which should only be a used to support income tax.
Changing to the use of consumption taxes would reduce the consumption expenditures of individuals. This may means that many would prefer to save rather than to consume which is still risky to an economy. Personally I prefer the income tax regime which should be progressive. This is so because it is fearer then a consumption tax regime. However, this kind of regime is may reduce the effort of workers as any extra coin they make goes to the tax man. Consumption tax can actually lead to high incomes since everyone must consume. It is however risky as people decide not to consume but to rather save in order to avoid paying the taxes.Please let me know if you need any clarification. I'm always happy to answer your questions.
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