This would be problematic for people who've paid income taxes for their whole lives and have planned retirement based on the current system. Assume a $1.5M nest-egg and a safe-withdrawal rate of 4% per year. Ignoring capital gains taxes, property taxes, etc, this leaves you with a modest $60,000 retirement income. Based off your proposed figures, that wealth would have a $20,000 annual tax bill, which is 1.3% of the total. Now, since the safe withdrawal rate is 4%, you can only withdraw 2.7% for your retirement income, which leave you with $40,500.
In other words, your 1-2% tax has reduced the passive income by 33%.
Of course, it would be much easier to grow the retirement account without income taxes, which would likely more than offset offset this reduction. For people who have paid income tax and planned their retirements based on the current system, this change would be devistating.
In other words, your 1-2% tax has reduced the passive income by 33%.
Of course, it would be much easier to grow the retirement account without income taxes, which would likely more than offset offset this reduction. For people who have paid income tax and planned their retirements based on the current system, this change would be devistating.