Quote:
Originally posted by Mmmm, Burger (C.J.)
I thought you were the expert, but I understand that IRA/401ks cannot invest in certain tangible assets, including such things as coins, baseball cards, and what not, but also including real estate (other that REITs) and presumably other things--you can't just own a factory in your IRA.
Because we're on an income system, you have to come up with a transition. You can't just say you get taxed when you pull out savings, because then all retirees get soaked. So if you use CSAs, it's entirely optional. Put in what you want, with the recognition that anything you pull out from that account will be taxed as "income". It's not a perfect system, but within a generation, one could much more easily transition to a pure consumption tax without the need for accounts.
Think outside the box people--it's not a tax shelter, it's just a question of when you pay the tax. With highly beneficial consequences for savings over consummption.
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It's a question of the tax base; consumption taxes one particular base but leaves others alone. The others left alone are wealth and income. Definitions drive much of taxation: how you define "consume" is critical.
I can agree with you in theory that you can create a progressive tax system, but I'd not sure you want to. If you think savings drive all productivity, you'll be prone to think a consumption tax is a great thing. I don't - you can have excessive savings, and you need demand to fuel investment and make it rational.
As an example, assume you shift to a consumption tax and so people stop wanting to buy fancy Detroit cars, since the tax is steep. So, the auto jobs go away. Instead, people want to invest in something that's going to make money. Well, the US auto business sucks, so that's not an option. But, Toyota is doing well - so let's invest in Toyota. Cue giant sucking sound.
Consumption taxes can have their place, but as the primary means of support for the government, displacing income taxes, the base is just too narrow.
