One seemingly obvious problem to this (at least the way you describe it, maybe not the way it's actually proposed - I didn't read it) is that this would disincentivize spending, and incentivize saving. So it would seem[1] that this would cause the economy to take a big hit.
I just remember a few years back when the economy was at the worst we've seen in a while, the government seemed to really push spending and investing in stocks over saving. So if there was no penalty for earning money, only spending it, we'd be back in the same boat.
[1] Disclaimer: I'm certainly not an expert in economics.
The US economy is in such dire straights because of consumption, not due to the lack of it. The Keynesian economics fraud of the last few decades (see: Japan, half of Europe, the US), which has been pushed 24/7 at every level of government and media, is massively to blame.
Ask yourself one simple question: how does higher consumer spending help the US economy when all that money flows back to eg China? Right now the US is merely a middleman, with service workers that take a small cut for distribution.
China as you'll have noticed is getting wildly rich, at breakneck speed, without the need to constantly push over consumption (their savings rate is doing just fine).
America needs a lot more savings, capital investment, and production, and a lot less spending. We had this algorithm decades ago, and we were extraordinarily rich accordingly, and were far better off with a lot less consumer spending as a ratio of our economy.
To paraphrase Warren Buffett: you get rich producing things, and you get poor buying things.
China figured out how it works. Their economy more closely resembles the US economy of the early 20th century, in terms of production vs consumption. The arguments being made for China to consume more, are arguments in favor of China handicapping itself to allow others to compete more easily.
I just remember a few years back when the economy was at the worst we've seen in a while, the government seemed to really push spending and investing in stocks over saving. So if there was no penalty for earning money, only spending it, we'd be back in the same boat.
[1] Disclaimer: I'm certainly not an expert in economics.