Those on SS only would pay no tax whatsoever. Those who had any wealth inside qualified plans would benefit greatly. Those who accumulated wealth outside qualified plans would be able to continue the growth of that money tax free. Those who really could afford to spend a lot of money would be the only ones hurt. Not that they should be.
Dear groanup,
The very well-off seniors and the very poorly-off seniors do well under this plan.
Looks to me that the folks in the middle get crunched.
Here's an example.
Current system:
Married couple, both aged 65.
Annual income: $60,000.
Take the standard deduction (they get four because they're both 65 or older): $12,000
Marginal tax bracket: 15%
No payroll taxes, of course.
Total federal personal income tax liability: $6,500.
Spend pretty much 100% of income (what else are they gonna do?? Save it for retirement??).
Out of their $60,000, they get to spend $53,500 under the current system.
NSRT:
Annual income: $60,000
"Prebate": $4,402
Total income: $64,402
Their equivalent purchasing power after accounting for the NSRT is: $49,589.54.
Purchasing power old system: $53,500
Purchasing power new system: $49,589.54.
Looks to me like they're screwed.
Oh well, they can go work part-time at Wal-Mart to make up the difference.
By the way, if one or both of them is legally blind without corrective eyeglasses, they're even more screwed, as they'd get extra standard deductions, and would pay even less under the existing system.
sitetest