That's by design, no? Consumption stimulates the economy better than investment does (particularly under present conditions), and by discouraging investment we disincentivize the concentration of wealth and the political problems that leads to.

Consumption does in fact help create inflation thereby reducing real wages and fooling prideful workers [1] into returning to the workforce. In the US we are currently at full employment so this is not actually beneficial.

In the long run investment - i.e. devoting resources to increasing future productivity - is what is needed. To clarify the distinction, investment is research in self driving cars while consumption is driving an existing car.

[1] Prideful workers (the villains in Keynesian economics) are the people who refuse to accept work at a lower nominal wage than what they previously earned. Instead, they sit on their asses enjoying funemployment.

We're at full employment in the sense that workers seeking a job can find one, but wouldn't that figure not count those "prideful workers"?

Consumption must grow at the same rate as production, right? So either can be the limiting factor on economic growth, and investing at a rate that doesn't match consumption growth is wasteful (it would be better for the economy if that money were expended on consumption instead), no?

No, Keynes' prideful workers certainly count as unemployed. They are actively seeking work, they just refuse to take work at wages that offend them.

Consumption must grow at the same rate as production, right? So either can be the limiting factor on economic growth, and investing at a rate that doesn't match consumption growth is wasteful (it would be better for the economy if that money were expended on consumption instead), no?

Yes, it's more or less true that consumption + investment = production. Investment is taking resources from consumption today in order to increase production in the future.

Let me make a software engineering analogy. Consumption = building cool, user visible features that product can show to upper management.

Investment = cleaning up tech debt, refactoring the code, or building massive infrastructure that (once complete) will enable many new features.

Product always wants new features. Whatever engineering can create, product will insist on deploying. If product insists on ignoring tech debt and refuses to invest in any infrastructure project, then eventually the rate at which new features are built will slow to a crawl. This is what happens when you shift from investment to consumption.

The idea of consumption increasing future wealth only applies in cases where production is below potential - where people could work but refuse to do so. The closest thing to stimulus I can cook up in my analogy is tricking lazy developers who refuse to work into actually working because you allow them to use node.js.

But if you spend all your time working on infrastructure and don't make any new features then you end up with something worthless too. So it doesn't make sense to "tax" employees more for doing one than doing the other (or rather, if you want to tax them at different rates you'd do so based on measurements of how much of each was getting done, not some a priori number).

If you read the Scott Sumner link I provided above, you'll realize why a consumption tax is actually the tax which doesn't favor one over the other.

The main reason is that investment is merely delayed consumption (as you note above), so the consumption tax hits everyone equally regardless of whether they consume or invest. However, a capital income tax is additional taxation that applies only to the person who invests.

I've had a second read and I think I see the contradiction. The article says it would be fine to tax GDP (and ultimately taxing all production should be equivalent to taxing all consumption). If I have x dollars of income, I can buy x dollars of beer, or I can buy a factory that will produce x NPV dollars of beer in the future. But the GDP in those cases would be different, wouldn't it? So in a tax-all-GDP regime I should be taxed on the x dollars of income now and, in the investment case, also on my investment income (or equivalently on my owned asset).