If all saving and investment could be placed into a tax-deferred saving account,then the federal income tax would approximate a consumption tax.

Question

Quizplus · Accepted Answer

Tax-deferred saving accounts, such as traditional IRAs and 401(k)s, allow individuals to defer paying taxes on their savings until retirement when they withdraw the funds. This means that the money saved and invested is not subject to taxes until it is actually used for consumption. Therefore, if all savings and investments were placed into tax-deferred accounts, the federal income tax would approximate a consumption tax, as individuals would only pay taxes on the money they use for consumption rather than on all their earnings.

If All Saving and Investment Could Be Placed into a Tax-Deferred