A flat income tax is suggested by many, and I have pondered it long and hard. It would not work. It has a regressive effect to the extent disposable income (which is what we need to save for retirement) is the focus on how taxes affect people. If you apply a flat tax on a person who makes $60k (assuming a disposable income of $5k), that is a harsh tax, compared to the flat tax on someone with $1 million in total income, with a congruent disposable income of $945k. Let's assume a flat rate of 15%. In essence, the former person pays $9,000 in tax – or 180% on his disposable income. The latter person pays $150,000, which is 15.88% of disposable income.

As to a consumption tax, the same problem tends to occur. It will only work out fair across the board if you operate on the assumption that, like the poor and middle class, the wealthy spend virtually all – if not all – of their income consuming. They don't, however. So, they save 80% of their income, instead of consuming it, and effectively shelter their income. The rest, however, pay tax on all – or almost all – their income because they have little choice. They have to eat, and spend almost all their income on mundane necessities, like gas, utilities, cars, furniture, etc.

If we want to have a system that stands out of the way as much as possible of people trying to save for retirement or investment, we need a wealth tax to take the place of any tax based on income. A sales tax is indirectly based on income, to the extent it applies to people who largely have to rely on their income (as opposed to trusts, dividends, interest, etc.) to make their livings.

Nobody likes taxes. So, no matter which way you go with taxes, somebody will always not like it. But the least pernicious would be a wealth tax.