Thoughts from a Friend of McHenry County Blog:
The Hidden Income Tax on our Elderly
A retired friend of mine said to me recently, in anguish:
“How am I going to live? I did all the right things when I was younger.
“I saved money every year for retirement and I planned on earning just 5% on my money, which is way below what interest rates were historically.
“Now I can barely get 2%!
“How am I going to live?”
I told him
- that Alan Greenspan and Ben Bernanke had decided to sacrifice our senior citizens to business,
- that ultra-low interest rates benefited business at the expense of consumers.
And I told him there is another way of looking at the Fed’s policies:
as a hidden income tax.
Suppose you earned just 5% on your savings, which is indeed below the historical average, even if we leave out the high inflation 1970s and 1980s.
And suppose that, after taxes, you had only 1.5% left.
What would that make the federal income tax rate?
But in the current environment, because of the Fed’s policies, you are lucky to earn even 2% on your savings, and, after taxes, you are left with 1.5%.
So, is your income tax rate 25%, or is it really 70%?
The answer is that low interest rates are a hidden 70% tax on the income of our senior citizens.