Where the money is....

When Willie Sutton bank robber was asked why he robbed banks he said "Because that is where the money is". How things have changed.

The banker's Bank the Federal Reserve is now robbing savers with near zero interest rates. Why? Because that is where the money is. It is a hidden tax. No law was passed. Still you are having the your money stolen through near zero interest rates to restore bank's balance sheets. If you had $300,000 in an IRA (or 401k) earning 5% in 2007 ($18,000 a year with nearly no risk) you are lucky if you earn half that today. That is a $9,000 or more of hidden taxes.

I hope to expose these types of actions and others by the FED and government. Boomers need to be vigilant - because their savings is where the money is. I will also delve into other areas of finances of interest to Boomers.

Saturday, September 17, 2011

Flat tax or senior screw job?

Now for the higher income seniors a flat tax may be good, but for your average senior (say with an income of $30,000 per person) may be a another way to put the burden on those who already struggling to maintain a decent life style.  RepukeCon Cain is proposing a flat tax of 9% which I believe includes payroll taxes like FICA and Medicare.  For the bottom end this is a tax increase, for the more affluent this is a tax decrease (Payroll taxes for FICA and Medicare is 7.65% and 9% is greater than 7.65% and I would assume no EIC).

From the discussion of the flat tax I have heard it would eliminate exemptions and deductions.  This means you would pay taxes on the first dollar of income. 

Let's suppose you are single and drawing $18,000 in Social Security benefits.  In addition you receive about $12,000 of income from your retirement funds (company retirement or IRA).  Your total income is around $30,000.  Now if 1/2 your Social Security ($9,000) and other income ($12,000) is less than  $25,000 your Social Security benefits are not taxable.  In this case $9,000 + $12,000 is less than $25,000 so your Social security benefits are not taxable.  Your income subject to tax is $12,000.  Your personal exemption and the standard deduction total is around $8,500 so that leaves $3,500 taxable at a 10% rate.  Your federal income tax is around $350.

Under a flat tax of 9% your taxes on $30,000 ($18,000 Social Security + $12,000 other income) would be about $2700 or almost 8 X your current taxes.  Even if Social Security was excluded if you tax $12,000 from the first dollar the tax  your tax would be over $1,000 or almost 3 X your current tax.

I can't answer for you, but I have planned my future based on the current tax rules.  I say leave them alone!!!  Also, Cain is proposing a 9% sales tax.  This guy is a nut case IMO.

Isn't the lack of interest you are (interest not received) enough of a hidden tax?  How much do they think they can push on to seniors with limited income.  I did warn you early on though they would come after the money you had put aside for your retirement (because that is where the money is). 

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