Economically, you want to keep money flowing through the system as fast as possible. One dollar spent three times in a year contributes more to the economy than two dollars spent once. (I could imagine it even contributing more three dollars spent once due to participating in more transactions, but I don't know how you'd model that.)
If you tax spending, you incentivize hoarding cash, which decreases the "monetary velocity".
The psychology is different when income is taxed. People can choose to defer spending, but the only way to reduce income tax is to make less money- sure, some oddballs may do so out of spite, but most people prefer to maximize their income.
Furthermore, when combined with basic income, income tax does a better job of reducing the magnitude of inequality. While on its own that's a social argument, it becomes an economic argument very quickly: since it "takes money to make money", extreme inequality levels actually disincentivize productivity from the have-nots, since the expected return on effort becomes negligible.
If your entire economy is propped up by increasing levels of spending, isn't that a serious problem that could explode?
Even if you tax sales and incentivize saving, people will still spend money. They obviously need to purchase basic goods, and people will still want luxuries.
So, will people save more? Probably.
Will they stop spending and throw the economy into a downward death spiral? Highly doubtful.
As a followup, it has the added benefit of still getting tax money from the black market. If you are a drug dealer, you don't pay income tax, right? But you still buy goods and probably quite a few luxury goods. It also would capture tax money from the very wealthy if you drop all tax exemptions so they couldn't pay someone to find a loophole. It's not like they sit on their large sums of money and never purchase things.
If an economy is propped up by personal debt, things can (and have) exploded, yes.
But when not fueled by personal debt, you generally want faster spending, so that potential productive capacity gets used instead of left sitting for lack of demand.
Taxes: You definitely want to reduce loopholes as much as possible, and a sufficiently generous basic income would reduce the need for a lot of tax breaks, yes.
It is observed, however, that the very wealthy spend proportionally less on goods and services; most of their income gets reinvested. Good for them, but it leads to a positive feedback loop.
Economically, you want to keep money flowing through the system as fast as possible. One dollar spent three times in a year contributes more to the economy than two dollars spent once. (I could imagine it even contributing more three dollars spent once due to participating in more transactions, but I don't know how you'd model that.)
If you tax spending, you incentivize hoarding cash, which decreases the "monetary velocity".
The psychology is different when income is taxed. People can choose to defer spending, but the only way to reduce income tax is to make less money- sure, some oddballs may do so out of spite, but most people prefer to maximize their income.
Furthermore, when combined with basic income, income tax does a better job of reducing the magnitude of inequality. While on its own that's a social argument, it becomes an economic argument very quickly: since it "takes money to make money", extreme inequality levels actually disincentivize productivity from the have-nots, since the expected return on effort becomes negligible.