Greenspan Touts Idea of A Consumption Tax

WASHINGTON -- Federal Reserve Chairman Alan Greenspan on Thursday embraced the notion of overhauling the nation's tax system and said that some form of a consumption tax -- such as a national sales tax -- could spur greater economic growth, The Associated Press reported.

The Fed chief made his comments in prepared remarks to the President's Advisory Panel on Federal Tax Reform. Revamping the complex tax code is an important goal of President Bush .

Greenspan pointed out the merits of a "consumption" tax, as well as the challenges of setting up such a tax. Consumption taxes can take the form of national retail sales taxes or a value-added tax, imposed on the increased value of a good or service at each stage of manufacture and distribution and ultimately passed on to the consumer.

"As you know, many economists believe that a consumption tax would be best from the perspective of promoting economic growth -- particularly if one were designing a tax system from scratch -- because a consumption tax is likely to encourage saving and capital formation," Greenspan said.

"However, getting from the current tax system to a consumption tax raises a challenging set of transition issues," he added.

-- NYSSCPA.org News Staff

Posted on 3/3/05