The successful retired have savings to use for the remainder of their life, that will be consumed, more or less, throughout their retirement. Much of their savings has been burdened with Social security, medicare, federal and state income tax, and inflation brought about by federal government monetary policy. The currently taxable furture earnings on these savings will be a small part of the 40 years of accumulated savings. Most people I know (middle class, engineer) in their 50's have 1/2 to 1 million in accumulated retirement savings. So we are talking about a $125000 to $250000 tax assessment against these prudent peoples' savings. That's where the tax benefit would be coming from. A (one time) ripoff of the boomers.
It would be a simple matter for the "Fair Tax" bill to include a provision to compensate those who had after tax savings, with a 25% (or whatever the sales tax rate would be) payment of net after-tax savings as compensation for future taxes. Compensation is proposed to make the "poor" wage earners whole with respect to the new taxation method. Do you hear of compensation for savers in the plan? No!
The purpose of this "Fair Tax" is to get at the massive savings that the boomers have accumulated, because the federal government's voracious appetite for money will likely cause the working stiffs to revolt (like OMB projections of 75-85% tax burdens on wage earners). The septuagenarians will not have the strength to overthrow the avaricious political class thieves.
How about an annual tax on "net worth"? Why not? Because it would affect the rich and powerful. But there is a weak group with bucks to hit - that is the boomer retirees. Sock it to 'em, with a "Fair Tax".
The purpose of this "Fair Tax" is to get at the massive savings that the boomers have accumulated,
Sure, they are going to tax my non-existant savings and the government will boom.
Grandfather Family Income Report - pg 1 - by MWHodges
http://mwhodges.home.att.net/family_a.htm#saving Rate of Personal Saving Plunges 100% - to new record low - $985 Billion missing  If families have less inflation-adjusted income, despite mother working, then family personal savings must suffer as a consequence - unless, of course, families reduce their consumption. But, families increased consumption spending and, to cover this, they reduced savings to historic lows and increased household debt to historic highs. Dangerous Trend !!!
The chart at the left shows a 45 year trend of that part of disposable income that has been saved - - called 'personal savings rate'. Note: prior to 1970 the rate of personal savings was rising smartly - - as were family incomes per the first chart above - despite most families then having but one wage earner while also living without increasing debt ratios (chart below). Then, family incomes stagnated - - and the saving ratio stopped rising as seen in the left chart - - then started falling rapidly - - plummeting since 1992. As of June 2005, savings were at an all-time record low of zero percent !! $985 Billion in savings missing in 2004 compared to savings ratio of 2 decades ago. (realized capital gains, not calculated in the savings rate, mitigate this chart somewhat if one wishes to call such savings - - but the trend with and without is at all-time record lows). |
But there is a weak group with bucks to hit - that is the boomer retirees. Sock it to 'em, with a "Fair Tax".
“It is amazing how many people think that they can answer an argument by attributing bad motives to those who disagree with them. Using this kind of reasoning, you can believe or not believe anything about anything, without having to bother to deal with facts or logic.”
--Dr. Thomas Sowell
Your reasoning is a bit out of whack in that under the present tax system those savings will be taxed, in some cases, when withdrawn and certainly when spent in the form of exmedded tax costs that amount to something like 20-25% of prices. The FairTax is actually no worse and in fact quite a bit better in that every family receives a prebate and the family controls how, when, and if what they buy is taxable or not.
Under the FairTax, not all things are taxed while under the present system they are as just mentioned and the family has no such set of choices when they buy. All items are boosted in price. In addition, under the FairTax income on savings and investment are not taxed and may accumulate tax free. The prebate, control of your own taxation and tax-free earnings make for a much better system for those with accumulated savings than at present.
In addition, prices will be decreasing due to the effects of the FairTax so that also helps as well. There is also the increased economic activity that will occur which will help offer new opportunities for many taxpayers. All in all you and your acquaintances should be quite a bit better off under the FairTax.