[ancient_geezer]

No we don't. We just defer the tax to a late date. And in retirement, collection SS and taking distributions from tax favored investments virtually guarantees you'll pay income tax on your gains.

Yes that well describes the current system with its 401k and most IRAs. That however has a conseqence when you go to a system that does not tax dividend, interest payments and capital gains.

The Armey/Shelby Flat Tax, does not tax the earnings on those investment vehicles as such gains are all exempted. This decreases the marginal tax rate on those savings to zero wiht no visible tax on consumption for the folks these vehicles are mainly useful to, the lower income groups.

The consequence according to Jorgenson and demonstrated in his models, is to encourage more consumption and lower investment/saving as a consequence. Encouraging a trend that portends some rather negative consequences for the economic future of this nation.

[Dimples]

The Armey/Shelby Flat Tax, does not tax the earnings on those investment vehicles as such gains are all exempted.

Neither does the FairTax.

This decreases the marginal tax rate on those savings to zero wiht no visible tax on consumption for the folks these vehicles are mainly useful to, the lower income groups.

Huh?? It that supposed to be a coherent sentence?

The consequence according to Jorgenson...

No, that would be the consequence according to ancient_geezer. Jorgenson makes no link between the visibility of the tax and consumption. Jorgenson does make a link between progressivity and consumption. From page 26 of the Baker paper:

"While it may seem paradoxical that consumption increases with a rise in the consumption tax, the marginal tax rate for low-income taxpayers is reduced to zero, stimulating consumption."

Again, the ST modeled by Jorgenson RAISES the marginal tax rate on low income taxpayers thereby diminishing consumption. BUT, the FairTax dosen't do that ... it's like Armey-Shelby: it lowers the marginal tax rate for low income taxpayers to zero. That, according to the model you base all you assertions on, stimulates consumption!

Encouraging a trend [increased consumption] that portends some rather negative consequences for the economic future of this nation.

So, given that the FairTax will also stimulate consumption (with all the attendant "negative consequences" thereof) by implementing the same mechanism that Jorgenson blames for the increased consumption under Armey-Shelby, I guess you don't support the FairTax either?