No. of Recommendations: 1
So if a flat tax is imposed, then pretty much all of our financial planning is for nought? Tax deferred and regular investments will pretty much be the same thing, and all those people who have paid taxes throughout their lives, saved up in IRAs, would suddenly find that in retirement that they their consumption taxes on everything own would quadruple from their expected retirement sales tax rates.

You seem to be mixing two types of taxes...flat taxes and consumption/sales taxes. These are not related.

A true flat tax is exactly the same tax system we have now except that there is only one tax rate regardless of the level of income. Modified flat taxes exempt some level of income and then there is just one tax rate on every dollar above that. This has nothing to do with your level of consumption.

Your post centers around consumption tax issues, so I will work with only those in mind the rest of the way.

If a national sales tax were to be implemented, there would have to be a whole lot of effort taken to make the process relatively fair.


Tax deferred and regular investments will pretty much be the same thing,

Are you referring to past investments? Or future investments? For future investments, there would be no need for tax-deferred accounts. Simply not spending the money would, in and of itself, constitute a tax-deferred account.

For past investments, your comment is incorrect as well. Tax-deferred money has never been taxes. Therefore, the consumption tax would simply replace the "income" tax as the method for the Federal government to receive its portion. Currently, you would pay income taxes on the amount you withdraw from your IRA each year...if the national sales tax were implemented, you would no longer pay income tax. This is a replacement that would (hopefully) be designed to even out overall for the average person.


and all those people who have paid taxes throughout their lives, saved up in IRAs,

??? Are you referring to Roth IRAs now? Most of the money in Traditional IRAs has never been taxed. So for most older people that have saved throughout their lives in an IRA, they have a nice sum of untaxed money sitting there...


would suddenly find that in retirement that they their consumption taxes on everything own would quadruple from their expected retirement sales tax rates.

But they would not pay income taxes on their Traditional IRA and 401k withdrawals as they are currently expected to do. Also, any pension they might receive would not be taxed as it is under the current system.

The only sources of money that could be "double-taxed" in the manner you are describing are:

1. After-tax contributions to a 401k or Traditional IRA
2. Roth IRA contributions
3. After-tax savings (i.e. brokerage accounts, bank accounts, etc.)


Although there are benefits, it looks like a plan to buy young peoples' votes with old peoples' money.

I don't think this is accurate at all. First, I don't think it buys anyone votes with anyone else's money. Second, there are more "old people" than "young people." Third, older people tend to be a lot more politically active. So any system that would screw the old and only benefit the young is going to lose out because politicians that support such a system will lose their jobs in a hurry.

Acme
(Who is still very much on the fence regarding consumption taxes...)
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