Seniors, IRA's & FairTax®

Find below a summation of info dealing with FairTax® and seniors from Q&A on the FairTax® site.  Also, you can view a paper on this subject at: http://www.fairtax.org/PDF/The_FairTax_benefits_seniors_11-7-06.pdf

       As a group, seniors do very well under the FairTax®. Low-income seniors are much better off under the FairTax than under the current income tax system.

       Some erroneously believe that people who live exclusively on Social Security pay no taxes. They may not know it, but they are paying hidden corporate income taxes and employer payroll taxes whenever they buy anything. Under the FairTax®, seniors pay only $0.23 out of every dollar they choose to spend on new goods and services.

      Plus, seniors, like everyone else, receive a monthly prebate, in advance of purchases, for taxes paid on the cost of necessities which more than pays for all of the taxes they would pay if they received the average Social Security benefit amount and spent it all. If seniors choose to work, they are freed from regressive payroll taxes, the federal income tax on wages, and the compliance burdens associated with each. They pay no more hidden taxes on goods or services, and used goods are tax free. There is no income tax on their Social Security benefits.

      The income tax imposed on investment income and pension benefits or IRA withdrawals is repealed. Pension funds, IRAs, and 401(k) plans had assets of $12 trillion in 2004. An income tax deduction was taken for contributions to most of these plans. All beneficiaries and owners of these plans expected to pay income tax on them upon withdrawal, but are not required to do so under the FairTax®.

      All owners of existing homes experience large capital gains due to the repeal of the income tax and implementation of the FairTax® Plan. Seniors have dramatically higher home ownership rates than other age groups (81 percent for seniors compared to 65 percent on average). Homes are often a family’s largest asset. Gains are likely to be in the range of 20 percent.

      The FairTax® makes the economy much more dynamic and prosperous. Consequently, federal tax revenues grow. This makes it less likely that federal budget pressures require Medicare or Social Security benefit cuts.

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Simply put, the FairTax® is a revenue-neutral proposal, raising no more money than does the current system. The FairTax® only changes where the money is raised, not the amount.

Additionally, some erroneously believe that people who have invested in Roth IRAs will never pay taxes on this money again. They may not know it, but they are paying corporate income taxes, employer payroll taxes, plus the associated compliance costs that are hidden in the price of every retail purchase they make. Under the FairTax®, these hidden taxes are driven out of retail prices. And note, they can determine the amount of tax they pay through their own lifestyle choices.

Furthermore, used goods are not taxed because they have already been taxed once -- when they were new. Therefore senior citizens, like all Americans, do not lose purchasing power, but gain it instead. Moreover, the FairTax® preserves the purchasing power of Social Security benefits, and seniors receive a monthly prebate so they don’t pay taxes on the purchase of necessities. Tax-deferred investments get a one-time windfall. Savings invested in any long-term, income-generating asset such as a stock, real estate, or a long-term bond that can’t be called, increase substantially in value. Finally, complex estate planning is an artifact of an earlier age.

Hope this helps!

Rudy

Rudy Treml

FairTax® Congressional District 06 Director with Oversight Central Florida

FFTEA BOD Member & Procurement Officer

AFFT Promotional Store Coordinator

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