Suppose the USA:
- Had mandatory savings for retirement
- Eliminated capital income taxes
- Broadened tax base and lowered the marginal tax rate
- Phased in reforms so all birth-year cohorts are made better off
- Left welfare programs and local public good shares the same
- Savings not part of taxable income, saving withdrawals part of taxable income – with these changes U.S. income tax would be a consumption tax
US Detrended GDP per Capita
Source: Edward Prescott and Ellen McGrattan 2013.

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