on-type tax under which "capital transactions are treated on a simple cash flow basis. Investments are simply deducted when made, and proceeds and sales and other capital transactions are added to income when received."
The second set of arguments is that the present tax system is unfair and that a consumption-based tax system would be fairer. The basic argument is that income and gains associated with savings and investment are subjected to double taxation at the corporate and individual level and that because of the patchwork of incentives, deductions and loopholes contained in the Internal Revenue Code, certain classes of taxpayers are discriminated against (and others favored). Andrews argues that a consumption-based tax, one "whose burdens are apportioned to current personal consumption expenditures rather than to total accretion" would be fairer. Hall & Rabushka argue that "a flat tax is the fairest tax of all."
Both Andrews and Rabushka-Hall use somewhat circular reasoning in arguing that a consumption-based tax would be fairer. Andrews says that if "the primary, intended, real effect of any general-revenue raising tax is to . . . curtail [private] consumption, then it is presumptively fair and efficient to distribute the burden of the tax proportionately or progressively in relation to levels of consumption." This formulation, however, assumes that it is fair to burden the poor and others who have limited capacity to save and invest in favor of those who have more discretionary income to be used for such purposes. Andrews rejects the entire concept of progressive rates of taxation, what Bradford calls vertical equity or the concept that "those with better circumstances should bear more of the tax burden." Andrews is really expressing a personal belief that savings and investment are the principal vehicles of economic progress and therefore should receive preferential tax treatment. Rabushka-Hall are even more explicit...