[The Dude]

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A rich family that wants to live very modestly will pay very little in tax. [ QUOTE ]

Precisely the problem I am refering to. If the rich have the ability to CHOOSE to pay less in taxes, there can only be one of two possible outcomes.

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You're missing something here. The ways that people spend money that is not considered consumption (ie they won't be taxed on that spending) are things the government wants us to spend it on. Paying down debt, giving to charitable organizations, and spending on education all reduce the amount that the government needs to spend on these programs.

So when somebody has the choice to pay less in tax, by spending in a fashion that reduces their tax burden, they are taking some of the load off of the government. Education is probably the best example. How much does the US government spend every year on education? I have no idea, but I know it's astronomical. When parents pay for their children to go to private school, or when people pay their way through college, the amount that the government has to spend to encourage its citizens to become more educated goes down. So, a system that does well at encouraging behavior does not need to be revenue nuetral. The government doesn't need to spend as much on alternative energy sources if everybody buys hybrid cars, so if the new tax system encourages everybody to buy more energy effecient cars as a means of paying less tax, that works out better than revenue neutral (since I think we all agree that the private sector is a more effecient spender than the government).

I don't have time to say more right now, but I have more to say later.

I encourage you to buy the book or read more on the website. The book starts out very pep-rallyish, but gets into some very good conversation and numbers a few chapters in.