Replies to post #358512 on Zeev's Turnips Patch-No Politics (ZEEV)

[phill]

TJ, flat tax is how they nail us for all that Roth IRA money we thought was gonna be "tax free" when we took it out. I knew there was a catch <ng>

regards,

phill

[Newly2b]

You seem to be talking about a flat income tax, but a flat national sales tax is also being considered.

One problem (among the many) with substituting a national sales tax for the current income tax is that it penalizes savers who suffer the double whammy of an income tax applied when they earned the money and a sales tax applied when they spend it, sending exactly the wrong message. (Although I would imagine the government would impose the sales tax in addition to a lowered income tax rate initially, then gradually increase the sales tax and phase out the income tax altogether -- doesn't matter, result is the same, double taxation on saved dollars.)

Since the nation already has a low savings rate, rumour of a switch to a sales tax system could cause a total depletion of domestic savings altogether. I for one would certainly run out and put my savings into commodities of some sort (gold, housing, whatever) before the tax was implemented if I saw it coming (and I believe many other savers would as well) in an effort to avoid the double taxation. This is not a good prospect for a nation so dependent upon foreign savings to support its spending habits, and a government that wishes to encourage Americans to save more, and thereby decrease our national dependence on foreign financing.

Newly