[Your Nightmare]

This is the breakdown of earnings, savings, and spending:

The income tax + payroll on $125,000 with $15,000 put into a 401(k) would be ~$31,000, not $35,000. And that's assuming a couple both working so the payroll tax is applied to the full amount and nothing but the standard deductions.

You also fail to account for any money in pre-tax savings, which would be taxed at a much lower rate than the FairTax when the couple retired. The effective income tax rate for a couple over 65 with $55,000 in income (of which 25% is after-tax gains, thus not taxable) would be ~5% - much less than what would be paid in FairTax. And, again, that's assuming only the standard deduction (i.e., no deductions for medical costs).

Needless to say, your analysis is lacking.

[eskimo]

Needless to say, your analysis is lacking.

Stopped counting how many times I have heard that concerning this subject. Another concern, given the seemingly careless quantifying, is that perhaps the same care was taken when predicting the effects on our society and our republic.

[Kellis91789]

I figured ZERO income tax on the ROI after retirement at age 65. That's less than your 5%, right ?

I alloted the full employee+employer side 15.3% of SS/M tax as the tax paid under the income tax -- since I was allowing for ZERO price drop, and hence ZERO embedded taxes in prices, I counted the entire SS/M tax as falling on the individual. My calculation was based on unmarried filing single, with a current $12K mortgage and $2K property tax deduction.

I know the $35K is right because THESE ARE MY OWN PERSONAL NUMBERS for 2005. The only part that doesn't match my life is the age. Other than that, this IS my FACTUAL situation, not a guess, and not a hypothetical at all.

Eskimo's argument was only on the already-taxed savings, so I didn't address the pre-taxed savings at all. If you'd like to look at the pre-taxed savings, then we can do that, but it would be a different argument. I assumed Eskimo would reject my mixing pre- and already- taxed accounts when his complaint was only about already-taxed savings.

On the already-taxed savings, $2,800 per month could be withdrawn for 25 years, ZERO income tax paid, and the ENTIRE $2,800 spent. That is compared to the much larger savings built up and showing that it lasts 25 years at a withdrawal rate of $4,800 per month. That $4,800 MORE than covers the $2,800 purchases PLUS FairTax.

What example were you looking at ? I skewed my example COMPLETELY in favor of the income tax, but the extra savings prior to retirement completely swamped the higher FairTax when spent. Ten years happens to be a long run of increased savings. If I were within 4 years of retirement, the FairTax would come out worse.

I was simply showing that Eskimo's statement about "anyone over 50 with savings" was based on a bad assumption. Get to over 60 years old, and the "already-taxed savings" argument begins to hold water. My goal with the FairTax is to dispell the myths and identify the REAL problems so solutions can be considered. By my calculations, "over 50" is not a problem, while "over 60" might be.