njordat

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Private savings being expropriated by federal government [Robert Higgs]

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[Richard] Rahn notes that besides suffering the loss of wealth occasioned by the negative real yield on such investments, the investor has to pay tax on the nominal yield—truly a case of the government’s adding insult to injury. He notes that given the currently prevailing rates of interest, rate of inflation, and tax rates, a small investor who earns a nominal yield of 1% and pays a 20% marginal tax rate, while the rate of inflation is 3.5 %, actually ends up paying a real tax rate of 370%. For example, an investor buys a $100,000 CD, earns $1,000 in annual interest, pays a tax of $200, and incurs a loss of $3,500 in purchasing power on the invested principal. Total (nominal) income is $1,000; total real tax (nominal tax plus inflation tax) is $3,700.

Astonishingly, this de facto robbery  is being committed by a government that misses no opportunity to shed crocodile tears over how single-mindedly it seeks to protect the weak and helpless among us.

http://blog.independent.org/2011/11/28/the-government-is-expropriating-private-wealth-at-a-rapid-rate/

HT Cafe Hayek

Written by njordat

December 2, 2011 at 9:22 pm

Posted in Economics, Politics

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