[AnthonyMouse]

> The household that brings home $80K/yr would always spend a larger percentage of their income on taxable consumption, than an executive that takes home multiple million per year. Progressive income tax brackets are a better tool for making sure those who are able to pay a larger share of the common good, do so.

"Progressive income tax brackets" don't actually do this. The people with so much money they can't spend it all use various tax shelters as it is. They typically manage to not even pay tax on the amounts they do spend, because they borrow money and spend it instead of recognizing it as income first. So they would be paying more under a flat consumption tax than they do under the status quo. The "progressive income tax system" doesn't actually work the way it's claimed to.

On top of that, the problem is essentially fake. People absolutely can and do spend millions of dollars a year. Cardiologists making seven figures buy huge houses with multi-car garages full of exotic makes etc. It's spending billions of dollars a year that nobody is really going to do, but that's such a tiny percentage of people that it's ridiculous to design a tax system being imposed on everybody else on the basis of that, and those are the exact people who aren't paying the high rates under the existing system anyway.

Here's a proposal: Have a flat consumption tax, and then have an income tax where the rate is 0% up to the 99.9th percentile income and only the top 0.1% even have to file a tax return. The latter is going to be avoided in the same ways it is now, but at least then you can't say the billionaires don't have a higher nominal rate, right?

[twoodfin]

The problem with a consumption tax is not the steady state, but the transition from the current state.

How do you take a retiree couple whose main income-earning days are far behind them, and ask them to pay 25% or more on their consumption?

Not an impossible problem, but it’s THE problem.

[AnthonyMouse]

Is it though? Both social security and 401k withdrawals are taxed under the existing income tax, so they'd just be paying it as consumption tax instead.

Also, aren't people with an enormous amount of stored wealth "the rich"?

[twoodfin]

You don’t have to have an enormous amount of stored wealth to be on a livable fixed income (e.g. a municipal pension) and that income could be very lightly taxed today relative to a viable consumption tax.

[AnthonyMouse]

Government pensions seem like the easy one. The state would be getting the revenue from when they spend the money, so they could use it to adjust the amount of the pension ("cost of living adjustment") and it would be revenue-neutral.

But also, government pensions tend to be, shall we say, unreasonably generous, because they live in that sour spot between "the legislature doesn't have to pay for this in the current year's budget" and "the union negotiates reasonable-seeming rules it knows it can game against public officials who are in their pocket or DGAF" e.g. pension is based on compensation in the last year before retirement and overtime is "awarded" based on seniority, so that people put in 80 hours of overtime every week in their last year. And then we're back to, aren't those the people we want to be taxing anyway?

[jrs235]

Are state government pensions worse? Folks live and work for a state that includes a pension, i.e. Illinois, then retire and move out of the state, no longer contributing to that state's economy, just drawing on it. Thoughts?