[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?