Everyone has to consume. Consumption is a necessity, and is unavoidable (and therefore unevadable). Some level of taxation is required since it determines the level to which government can spend without devaluing the currency, and it's also a tool that can be used to drain money out of the economy. But it's not required to "fund" anything -- what you want out of a tax is one that allows you to apply policy effectively. Putting tax legislation in place and enforcing it are two very different beasts. Having a consumption tax with sufficient offsets for low income earners is far less likely to result in evasion because everyone must consume, and no-one will refuse being GIVEN money (income tax is sort of the opposite: we don't tax consumption, but we tax income and try to tax high income earners more, which they do their best to evade; low income earners would never "evade" their transfer payments).

Prices and spending habits will adjust accordingly -- you're giving people a huge tax break in one area and adding a burden in another. There wouldn't be any impact on aggregate demand, but fiscal policy would be much easier to implement.

Video on how this works: https://www.youtube.com/watch?v=i35uBVeNp6c

Book on how this works: http://www.amazon.com/Modern-Money-Theory-Macroeconomics-Sov...