What Should a Reconfigured Tax System Look Like? opens with an amusing metaphor:
Tax systems are like septic tanks: they need to be cleaned out every 10 years or so.The last significant structural tax reform in the United States was in 1986, so we are long overdue for a thorough cleansing.
Our current system taxes income, but one alternative is to tax consumption:
One could directly impose a consumption tax by using a Value Added Tax (VAT) as is done in Europe. But a less disruptive change that still captures some of the benefits of a consumption tax would be to unify the current messy system of tax-deferred savings, including I.R.A.’s, 401(k)’s, 403′s and Keough plans. We do not really need all those different plans and having one, simple tax-deferred savings plan would make a lot of sense.
Having one, simple tax-deferred savings plan would make a lot of sense.
(Hat tip to Marginal Revolution.)