Taxation - what "liberal" vs "conservative" used to mean

Bruce Bartlett (Heritage foundation, Reagan/Bush Sr. administrations, etc.) has a new book out "The Benefit and the Burden - Tax Reform - Why We Need It and What It Will Take".  Its a great (if short) read, and one that I couldn't recommend higher.
I know, I know, why would I be recommending what could very well be partisan hackery?
Because it isn't. Really, surprisingly, and shockingly, it isn't.
But I'm not here to talk about the solution(s) in the book, as much to discuss the recent history of taxation in this country, one that has for all intents been completely forgotten by all and sundry.
But fear not - I'm here to remind y'all.

Consider your income, wherever it might come from, and whatever it might be. And no I'm not talking about your salary, i'm referring to all your income in every possible form.  Salary, gifts, inheritance, tips, quarter on the sidewalk, ill-gotten gains from mugging strangers, whatever.

There are basically two things, and only two things you can do with this.  You can save it, or you can consume it. I say "consume", because the difference is that if you burn them-thar dollar bills, you aren't actually spending it, but you certainly are consuming it :-)

Based on the above, it is pretty obvious that there are only three possible things that can be taxed

1. Only Savings
2. Both Consumption and Savings
3. Only Consumption

Everybody, but everybody assumes that taxing Only Savings is a remarkably stupid idea.
Why? 

Because your Saving is the foundation of capitalism.  At a first approximation, its the money that you put in your Savings account in the bank, and which the bank then lends out for investment, promoting the virtuous cycle of capitalism (the good sort, that is).  If you tax only this, and leave Consumption alone, you are incenting people to Consume instead of Save, thus decreasing the amount of private investment, and thus clobbering capitalism. Bad policy that.  Really bad policy all around.

Ergo, that leaves only options (2) and (3) for taxability. 
Historically, option (2) Both Consumption and Saving was considered the Liberal option, and option (3) Only Consumption was considered the Conservative option.

Think of it this way.  When we say Only Consumption, in its strict from (which is what we are using) we mean that you are using up stuff in the economy. e.g. You bought vegetables and ate them, thus removing it from the economy, and depriving it from others.  That is optimal taxation material, i.e., you think twice about what you consume...
When we say Both Consumption and Savings, what we mean is Stuff you took out of the economy (as Consumption) plus the amount that your net-worth grew by.  The second part is important, it means that if your net-worth grew by <pinkie>1 Million Dollars</pinkie>, then you get taxed on this growth, since this is the amount that you could have taken out of the economy without affecting your net-worth **

Did you know that?  I bet you didn't.  In fact, a close look at the current state of Liberal vs Conservative tax options doesn't seem to resemble options (2) and (3) at all, its just a whole bunch of weird tax schemes, loopholes, breaks, and god knows what else.  What it does not seem to have is any relevance to (2) and (3).

Hence Bruce Bartlett's book - read it, its a good primer on all this, and an eye-opening one at that.

** - Yes, assume inflation adjustment.  Also, do recall that we are referring to marginal rates.  So you are taxed on the  <pinkie>1 Million Dollars</pinkie>.