One of the major implications would be moving the nation away from consumption. That may not be so bad, says Mark Zandi, chief economist at Moody’s Analytics in West Chester, Pa. “The more we save and invest, the stronger our economy would be.” But, he quickly adds, “It’s not exactly what I would do, but I sympathize with the spirit.”
If you cut down on consumption, retailers fret it would cost them sales and the nation jobs.
“Every CEO says the reason they’re not hiring is because they’re not seeing demand,” says Rachelle Bernstein, a vice president and tax counsel at the National Retail Federation, a lobbying group, in Washington. "An additional tax on consumer spending will negatively impact that already weak demand."
Some economists worry the plan would result in national tax cheating since retailers might offer items for sale at two different prices: one with tax and one without tax for people paying with cash. “The incentive to cheat is huge,” says Nigel Gault, chief US economist for IHS Global Insight in Lexington, Mass.
Mr. Gault says this is the reason why most countries have enacted a Value Added Tax (VAT) that gets tacked on during the different phases of producing a product. As each tax gets added on, there is an incentive to pass it on.