<b>Ray Suarez:</b> Well, right now a lot of low income people pay no federal income tax, but they do buy things. Does that mean that they're almost inevitably going to pay a consumption tax?

<b>William Gale:</b> That's a very good example. A family of four doesn't pay any federal income tax until their income is in the 20s or 30s, something like that. If you go to a national sales tax or value added tax, they'd be paying that tax on the very first dollar that they buy.

Now, again, there's a way to insulate them from that by giving each household cash payments, but no country in the world actually does that. So in the real world, consumption taxes end up being more regressive than income taxes, although Len and I or anyone else could design a consumption tax on paper that wasn't like that.

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