I do agree that if the person was currently a saver their would be a problem. In fact I thought my tone in the post was that it wasn’t a good idea in practice, however I can’t write properly so that probably didn’t happen.

However, I do think, that for a person with no savings or borrowing, that believed that what ever tax arrangement was around would stay the same into the future, the switch of the tax from income to consumption would not change behaviour.

With the utility function thing, I reckon it would be cool to look at optimal progressiveness, in a model with multiple agents with different utility functions. Getting labour supply into that could be pretty cool.

Certainly, the sum of lifetime tax paid will be the same but I wouldn’t consider that a good measure of whether a tax is ‘flat’ or not. Taking the possible variation in utility functions and risk aversion into account would complicate things beyond the scope of a blog post comment so I haven’t thought about that much.

Now I think you are saying that a flat tax should ‘disadvantage everyone equally’, ergo the the dis-utility they suffer from the tax should be directly (and linearly) proportional to their income. However, if that is how we described a flat tax, then a ‘flat income tax’ would not we flat, as people have diminishing marginal utility.

The way I see it a flat tax implies that people pay the same proportion of their income in tax. Now, whether you tax someone when they are payed, or when they are consuming shouldn’t matter, as over a persons lifecycle they exhaust their entire income on consumption. As a result, a flat GST tax works just like a flat income tax, over an individuals lifecycle.

Now even if we thought their should be a flat tax (I’m sure neither of us do) one issue is, that if we scrap income tax now, and put in a flat GST, people who have saved are taxed twice.