The Anti-Doughnut Party

Government to Taxpayer – What’s the Point of Saving?

Posted on February 9, 2012 by JL

Since the financial meltdown of 2008, many people have lost their jobs and been forced to live off of their savings.  That’s a problem since America has, of late, had more of a consumer culture than a savings culture.  Part of that is culture is reinforced by the federal government as the I.R. S. imposes a tax on interest earned from savings.  Under federal law, interest earned from a savings account is taxed as income.  That sucks.  Why?  For starters, current interest rates for savings are under 1% and average 0.19% APY.  That means if you deposited $10,000 into a savings account on January 1st, you would earn an average of about $19 by next year.   You’re not going to make much by putting that hard earned money into a savings account right now.

Of the money you put in, the government will impose a tax on it as if it were income.  So for typical middle class families, that $19 would be taxed at 15% or 25%.  That would leave you with either $16.15 or $14.25 for putting aside $10,000 for a year.  Add inflation into the mix and even with compound interest, you’re not going to get very far saving at that rate of return.

The worst part about the government’s tax on your savings is that your money has already been taxed once from when you earned it.  That’s right. This is double taxation.  A hidden way to squeeze more money out of the American taxpayer.  That dollar that you earned was taxed once through income taxes.  You’ve decided to put it into savings to build a nest egg and, lo and behold, the government taxes you on that dollar again.  And we let it get way with it.  Outrageous, isn’t it.  The Anti-Doughnut Party feels its time to get rid of this highway robbery tax.  What do you think?