Replacing them with taxing withdrawals from savings. Not withdrawals from your passbook savings account or your money market fund. That could well be money that was already taxed, especially considering the low interest on these currently.
I think a better plan would be to create investment accounts similar to IRAs. If you put money into an IRA it is not taxed. When you withdraw money from an IRA you are taxed at the wages rate on the full amount of the withdrawal, regardless of the source of the money: original contribution, capital gains, dividends, or interest.
In one way, you can look at an IRA as a lousy investment tax-wise. You may have saved some taxes at time of deposit, but you may be paying for more taxes than if you had put the money in a traditional mutual fund, especially if you had large capital gains over the life of your account.
However, if we move all investments to IAs, we solve the problem of taxing capital gains, dividends, and interest at a lesser rate than taxing work at a desk or bench. We also eliminate many of the side effects of people changing investments to get some tax advantage. The markets may be less chaotic at year's end as people buy or sell stock for some advantage.
We also solve the problem of estate taxes. Those who bequeath or who are bequeathed often don't want a penny of taxes to come out of the estate. But what happened to all the capital gains taxes that might have been paid if the deceased had lived. If an Investment Account is bequeathed, the beneficiaries would only be taxed on the money they withdrew. They would be free to buy and sell investments in the Investment Account without being concerned about the tax consequences of the transactions.
Probably most opposition to this plan would come from those benefiting from the current tangle of tax laws - lawyers, estate planners, and so on.
I've been sitting on this idea for some time; I was prompted to write about it after reading "Savings Accounts for All: Simple, but Not Easy" by Ron Lieber for the New York Times and republished today on Yahoo! Finance.
I also posted the above to http://www.whitehouse.gov/contact/
