So I was thinking about my plans for retirement, which will involve a Roth Conversion Ladder. I'm mostly investing in traditional IRAs, and my 401k will rollover into said traditional IRAs. So I'll have a good amount of my assets in pretax accounts. Therefore after I retire, I'll likely be moving about 1 year of cash from the pretax accounts to a Roth, and pay income taxes on those funds as they transfer.
When I go to my retirement planning spreadsheet (we all have one, right? :p) and start fiddling with the knobs, it makes sense that the income taxes I will pay on those transfers are based on about how much money I'll need for the year. So if I want to spend 30k a year, I need to transfer ~30k, which will be taxed as income. However, if I can reduce spending to 20k, I'll only need to transfer ~20k, and so the taxes are much less.
So in the hypothetical case where your retirement funds are entirely in pretax IRAs, making use of a Roth Conversion Ladder would mean you are pretty much taxed based on how much you spend! Which is great because it's another incentive to reduce spending.
Of course most retirement accounts are a tad more complicated than "everything in my traditional IRA", but this hypothetical applies largely to me. I think higher income plans especially can't get a very high savings rate with IRA/401k contributions.
I'm sure this isn't a novel idea, but it's the first time I realized it. If you take into account the ability to avoid taxes in the earning years with pretax accounts, it seems like those with low-moderate incomes can be taxed at a rate more based on what they spend rather than what they make.