Tax and Inflation Penalize Savers
May 1, 2007 by TFBI bought some EE savings bonds in May 2002. Today is the first day I get to redeem them without penalty. Each $100 saved back then is now worth $118.40. This is one of my worst investments in the last five years. My return on these EE savings bonds is 3.44% a year over the last 5 years. Inflation, measured by the Consumer Price Index, averaged 2.81% a year in the same period. So it looks like I came out slightly ahead of inflation. But wait, I have to pay tax on the interest. After tax and inflation, I lost money. I loaned my hard earned money to the U.S. Treasury for 5 long years. Now they paid me back less than what I loaned them. How sad. Tax and inflation penalize savers. No wonder Americans are said to have low savings rate. I think taxing inflation is wrong.
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taxing inflation might be wrong, but trying to come up with a fix would probably be worse than the disease.
It’s good to be the government. They control the presses, and they tax the results.
To make things fair, I want my cush state job with guaranteed health care and pension during retirement!
Do you think savings rates for people would increase if the government offered a tax deduction equal to inflation on savings earnings?
I agree. Taxing inflationary gains is crazy! I happen to know for a fact that some countries do not tax inflationary gains, and only tax real gains.
It is not a complicated matter, financial institutions handle the reporting behind the scenes, such that it is transparent to the small investor, and is pretty much cheat proof.
Come on people … THIMK!
The government doesn’t WANT you to save, that’s why they just screwed you over. It’s to TEACH YOU A LESSON.
If you save … then you didn’t spend! The economy didn’t get better. Politicians begin sweating. You paid no sales taxes on top of the income tax. Your saved money that wasn’t spent wasn’t then used to pay the cashier, who then pays income taxes on THAT!
If you’re wondering why the government is taxing interest earned on saving, then you aren’t paying attention.
The government taxes people for doing things the government doesn’t want them to do! It’s called a “disincentive.”
Invest your money … don’t save it (beyond of course, emergencies and your down payment on a home.)