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Thursday, April 06, 2006

Fair Tax for Senior Citizens

You have worked for many, many years and get a pension every month. Under the current tax plan you are taxed on the entire amount you received through the year. If you had a pension of $1000 a month (and I hope it was much more than that), you will be taxed on $12,000. I did my dad's taxes for several years and was appalled that his pension was taxed as income.

Maybe you worked for years and have a sizeable IRA. When you withdraw that money you will be taxed (unless you put that IRA into a Roth account, but most people have traditional IRA's). As I understand it, after a certain age, you will be penalized for not withdrawing a specific amount. I have heard that there is a 50% penalty if you fail to withdraw enough money after age 70.5. So you are both taxed and penalized for wanting to save your own money!

If you are lucky enough to have stocks and/or bonds you are taxed on the capital gains when you sell those stock. Let's say you sell stocks to pay for a medical procedure or you want to take a vacation; maybe you see your stock going down and want to get out ahead - the reason doesn't matter. You will be taxed on those funds. If you put the proceeds of that sale in your savings account you will be taxed at the end of the year. And you will pay taxes on that savings as long as you have a savings account.

Let's think about this scenario: your spouse passes away and you decide to move to a smaller house. You have a small mortgage (or maybe no mortgage at all) and thanks to today's real estate market you have a sizeable amount in proceeds that you put in the bank. It's for you "old age" or for a rainy day or whatever. Good for you! But. Uncle Sam requires that your declare each year how much you have in savings as part of your tax return. And you will pay taxes on that savings as long as you have a savings account. Ever hear that before?

The Fair Tax treats each of these instances the same way. You only pay taxes when you make a purchase. Your pension hits the bank on the 1st of the month. You will pay taxes on what you buy that month. Let's say your pension is $1000. If you spend $500 you are "taxed" on that $500. The tax is paid then and there, not at the end of the year (or rather when you file your taxes).

Under the Fair Tax, you don't pay tax on your pension, you don't pay taxes on stock sales, you don't pay taxes on the proceeds of the sale of your house, you don't pay taxes on your savings account or withdrawals from your IRA.

You will also receive, untaxed until used to buy new goods or services, a prebate each and every month based on the number of people in your household. Not based on your income or marital status, but on the size of your household. As a senior, you will receive a smaller prebate than a young couple with a couple of kids, but then, you will not be spending as much for the basic necessities of life.

As a person looking down the barrel of senior citizenhood, this is a no-brainer.

10 Comments:

Blogger johnwk said...

As a constitutional “conservative” and one who has faith in the wisdom of our founding fathers plan, our Constitution, I find it difficult to confront supporters of H.R. 25, especially when they are under the impression H.R. 25 would advance conservative ideals and principles. Unfortunately, just like people were conned when they supported the adoption of the 16th Amendment, H.R. 25 is another con job proposal which would benefit folks in government, just like the income tax now does, and would actually tighten the iron fist of government over the production of America’s businesses, industries or labor!

If you think you are not being conned, then take the time to study, with an open mind, the following
MESSAGE TO FAIR TAX RALLY PARTICIPANTS


Let me also point out that many of the ring leaders which crafted a balanced budget amendment in the 1980’s are the same crowd which now proposes a legislative line item veto power for the president. What do both proposals have in common and how do they tie into tax reform? Both proposals are sold to the people as a method to force fiscal discipline upon Congress. But, the proposed balanced budget amendment was filled with loopholes to allow Congress to continued in its reckless spending and borrowing, and, the proposed line-item-veto now being promoted likewise does squat to force or encourage fiscal discipline upon Congress___ the objective of this crowd is nothing more than creating an illusion that they are fiscal conservatives and different than their opposing political rivals They are not different and are very, very dangerous enemies to a freedom loving society!

Now, how does H.R. 25 tie into the line item veto and the balanced budget amendment? Surprise! H.R. 25 is being sold as a “conservative” idea, but is an illusion of fiscal conservatism, and, as documented in the above MESSAGE TO FAIR TAX RALLY PARTICIPANTS, would actually subjugate one of the most important rules agree to by our founding fathers which was designed to force fiscal discipline upon Congress; force Congress to extinguish deficits created by reckless spending and borrowing; and, our founding fathers rule, if followed today would also make every member of Congress immediately accountable to their state governor and legislature should they engage in reckless pork spending and borrowing! For details see: Our Line-Item-Veto con artists in Congress



Regards,

JWK, founder
American Constitutional Research Service

Thursday, June 29, 2006 1:59:00 PM

 
Anonymous Dragon said...

HR 25 is neither being sold as conservative, nor is it an illusion of fiscal conservatism. Americans For Fair Taxation was formed in 1995 as a 501 (c)(4) nonprofit, nonpartisan, grassroots organization solely dedicated to replacing the current tax system.

Monday, December 10, 2007 8:13:00 PM

 
Blogger Dan Hood said...

The Fairtax is not meant to be a cure-all for the abuses we suffer at the hands of our government, but it's a start. It's the best way I know to start putting power back in the hands of the people.

Tuesday, December 11, 2007 4:22:00 PM

 
Anonymous dragon said...

I agree. But, it is my understanding that the new system will be more transparent. That will help a lot.

One more thing: I know that Americans for Fair Taxation designed the FairTax to be revenue neutral. But, I've recently discovered an interesting article (Wall Street Journal;Classroom edition) on the underground economy. It said we could see surpluses. If that is true, we could either decrease taxes or allow the yearly surplus to take care of our debts, especially SS and Medicare.

Wednesday, December 12, 2007 12:15:00 AM

 
Anonymous Dragon said...

I seemed to have forgotten the link to the cite I mentioned, to the Wall Street Journal.

Wednesday, December 12, 2007 12:17:00 AM

 
Blogger Mark said...

Fairtax is a no brainer for seniors.

Seniors pay the highest health cost, and health care is taxed. All health care - every bit of health care.

Health care is a 2 trillion dollar market -- so FT pretends to get 460 billion in taxes from that.

HOW? Not one person has told HOW you collect 460 billion from people in nursing homes, people with cancer, from the parents of a leukemia victim.

Thats just one absurdity of the fairtax, there are a dozen others.

Tuesday, February 19, 2008 7:00:00 AM

 
Anonymous Anonymous said...

Senior Citizens are a Prime example of People who wilol get KILLED by the 'Fair Tax'

The example given- people who make 1000 a month/12K a year.
Senior ciztizens weho aren't wealthy and who live on their SS or pesnions spend 100% of thweir inconme- which would be taxed under Fair tax at a Clained-at-best rate of 30%..
Well below the Tiny Income tax that's due on 12,000.. IF ANY.

Wednesday, June 25, 2008 10:23:00 PM

 
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Blogger PHL Taxi said...

Why government putting tax on pension?even people retired and not working.It should be totally free of tax.
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Wednesday, March 06, 2013 4:25:00 AM

 
Blogger PHL Taxi said...

Really awesome post and thanks for sharing it.
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Tuesday, March 12, 2013 4:44:00 AM

 

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