The consumption tax, when implemented alone, is 9.4 percentage points lower than the flat tax. The rate is lower for the consumption tax because the tax base for the consumption tax, which equals the value of consumption expenditures, is larger than the tax base for the flat tax, which equals taxable income. The implementation of an energy tax allows the consumption tax rate to be reduced further.
Tax collections are lower under the combination tax because economic growth is stronger.
Dale W. Jorgenson Associates, 1996.