<i>&gt; Without a consumption tax, they can spend all of it without paying any taxes.</i><p>But even with VAT they <i>almost don&#x27;t</i>, that&#x27;s the thing. Because they can afford not-even-that-fancy accountants (or just one), they can simply reclaim the tax as business expense or shuffle most of it downstream to whoever is buying their services (there are bazillions of rules, of course, but they are not that hard to bend). People without accountants and company ownership cannot do that.<p>Say a &quot;normal&quot; guy buys car X, paying £1000 -- 200 of those go in tax. A &quot;vat-savvy&quot; guy buys the same car through his company, pays £1k, then claims VAT as a business expense. In practice, he&#x27;s just bought the same car for £800. <i>This is widespread</i>, and obviously frowned upon by tax authorities, but it&#x27;s like emptying the sea with a spoon. (Note: cars are actually more regulated than other items, exactly because of this sort of trick happening since the beginning of time on a well-known expensive item, but there are plenty of equivalent items that go undetected).<p><i>&gt; The theory is supposed to be that the rich spend less of their income than the poor.</i><p>It&#x27;s not just that, it&#x27;s that <i>in absolute terms</i> the exact same thing is taxed <i>in exactly the same way</i> for rich and poor alike. That is regressive, like all flat taxes. It wouldn&#x27;t be <i>if and only if</i> rich people only ever bought more expensive luxury items, which is not true in practice: they buy a lot of stuff in the same malls working-class people use, but they pay the exact same flat tax on each sweater.<p><i>&gt; So which one is the regressive one?</i><p>It&#x27;s a false dichotomy -- you can (and should) use multiple types of taxation at the same time. It&#x27;s pretty clear that personal income taxes are not sufficient, but the answer is not removing those to introduce flat consumption taxes which are even worse in real terms; the answer is to increase taxation on capital profits, rent and property, which is where the real wealth lies.<p>Tax theory is old and fairly well-understood from a systemic perspective, but obviously nobody wants to piss off their political donors, whereas little people are easily gamed.