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You don't have to stash savings under a mattress to take a hit. Small Business Owners either don't have quite as easy access to a 401(k), for cost reasons, or have savings substantially higher than that permitted by a 401(k). Roth IRAs, which many people have because they are better under an income tax system, suffer the same problem, because people pay tax up front to avoid future taxes - if there are no future taxes, then people paid unnecessary taxes upfront.

I brought up municipal bonds before and I will refer to them again. No wise investor will invest in municipal bonds in a tax-exempt pension. We know that the municipal bond market is about 2 trillion dollars, so right away we know that there is at a minimum 2 trillion dollars in savings by people who have as you put it, "unforunately stashed their savings under the matress." 2 trillion dollars is not insignificant.

We know that many seniors have a lot of money held in CDs, all this money falls in the same category. What about capital tied up in investment assets, such as real estate, etc. At some point, that money will be spent and taxed and once that happens it has been double taxed, because without switching to the NRST, no federal sales tax would have been paid and no additional income tax is required.

I never understood this one point. At least to me, it is obvious that a lot of wealth will be double taxed. Many people who fall into this category will absolutely be opposed to switching to the NRST. Why will freepers not at least recognize the obvious? My goal is not to bash the NRST, I have stated many times that I strongly prefer the NRST. I just do not believe that with the problems I have discussed it will ever have the support required for passage and am trying to bring about a discussion that could lead to at least a partial solution to the problem.

"I never understood this one point. At least to me, it is obvious that a lot of wealth will be double taxed. Many people who fall into this category will absolutely be opposed to switching to the NRST. Why will freepers not at least recognize the obvious? My goal is not to bash the NRST, I have stated many times that I strongly prefer the NRST. I just do not believe that with the problems I have discussed it will ever have the support required for passage and am trying to bring about a discussion that could lead to at least a partial solution to the problem."

Suppose I said to you "Undeniable Logic, I have a plan which will double the value of your investments over 24 months. That's the good news. The bad news is you will have to pay taxes on a small portion of that increase."

And your answer would be?

Those with substantial savings, which are appropriately invested, will be huge WINNERS, not losers, under the FairTax.

"You don't have to stash savings under a mattress to take a hit. Small Business Owners either don't have quite as easy access to a 401(k), for cost reasons, or have savings substantially higher than that permitted by a 401(k). Roth IRAs, which many people have because they are better under an income tax system, suffer the same problem, because people pay tax up front to avoid future taxes - if there are no future taxes, then people paid unnecessary taxes upfront."

-- OK, let's take the Small Business Owner. 401(k) contributions are capped at $12,000, so he can save quite a bit in there. On top of that, many small business owners reinvest savings back into their business. Under the FairTax, they can sell their business and pay ZERO capital gains tax, or give it to a family member BEFORE they die if they like, or pass it on as an inheritance. Remember, a business is a capital investment, so profit off the sell of that is also tax-free.
-- The Roth IRA example doesn't hold water. The Roth IRA has only existed since 1998, so the maximum ANYBODY has invested in their Roth IRA is $17,000 ($2,000/yr. for 98-01, $3,000/yr. for 02-04). So nobody has substantial retirement savings in a Roth IRA. Furthermore, the "rich" can't invest in Roth IRAs ($150k+). So Roth IRAs aren't really a factor.

"I brought up municipal bonds before and I will refer to them again. No wise investor will invest in municipal bonds in a tax-exempt pension. We know that the municipal bond market is about 2 trillion dollars, so right away we know that there is at a minimum 2 trillion dollars in savings by people who have as you put it, "unfortunately stashed their savings under the mattress." 2 trillion dollars is not insignificant."

-- You're damn right no wise investor will invest in municipal bonds in a tax-exempt pension. That's why the trillions of dollars tied up in pensions AREN'T invested in MUNIs. Under the FairTax, investors can choose to invest in MUNIs if they want to. Of course, MUNIs will probably have to start issuing bigger coupons to be able to compete with corporate bonds. And all that would do is make it harder for governments to borrow money. Federal bonds aren't going to be affected the same way as sub-federal MUNIs will because so much foreign money flows into them. I understand $2T is not insignificant. But so what? If people start selling off MUNIs, municipalities have to start issuing higher rates if they're not attracting investors anymore. I read a study a while back that stated that the tax-free status of MUNI's subsidized sub-federal borrowing by $12 - $25 Billion dollars A YEAR. What that tells me is that there's a huge bubble in the MUNI market. Any correction resulting from implementation of the FairTax would simply correct the bubble. Sad but true. Should we have subsidized all the dot-com stocks? After all, people lost trillions of dollars when that bubble popped, and that was much larger than the MUNI market.

"We know that many seniors have a lot of money held in CDs, all this money falls in the same category. What about capital tied up in investment assets, such as real estate, etc. At some point, that money will be spent and taxed and once that happens it has been double taxed, because without switching to the NRST, no federal sales tax would have been paid and no additional income tax is required."

-- Capital gains taxes must be paid on CDs as well, so seniors won't have to pay that under the FairTax. Regrading Real Estate, Capital Gains or estate taxes would have to be paid on those too, especially if it wasn't a primary residency (the first $250k of the sale of a home you lived in for 5 years is untaxed). If it was an investment property, they would pay through the nose to sell it under the current system. So this point isn't valid either.

"I never understood this one point. At least to me, it is obvious that a lot of wealth will be double taxed. Many people who fall into this category will absolutely be opposed to switching to the NRST. Why will freepers not at least recognize the obvious? My goal is not to bash the NRST, I have stated many times that I strongly prefer the NRST. I just do not believe that with the problems I have discussed it will ever have the support required for passage and am trying to bring about a discussion that could lead to at least a partial solution to the problem."

-- Wanna talk about double taxation? How about dividends for starters. A company makes a profit, pays corporate taxes on it, then gives a dividend to the shareholder who again pays taxes on it! How about all the seniors who receive dividends? Did you know that Treasury statistics show they are the recipients of about 50 percent of the nation's dividend income? In fact, half of the 18 million seniors who file taxes receive dividends. The president addressed this issue last year, but didn't reach his goal of completely eliminating them.
-- How about seniors who make too much money to receive a full SS check. Did you know that some seniors pay a 85% tax rate on their SS check because they make too much money? Well, they'll get that now.

-- I completely understand your argument, but the fact is that most savers have their assets in things that they'll have to pay taxes on some day. And that's the truth.