Focus Point - Why Taxes Kill SavingsCommentary by Pete du Pont
September 21, 2001
I'm Pete du Pont with the National Center for Policy Analysis. A big worry of recent years is the falling U.S. savings rate - it's actually gone negative. A new study by Stephen Entin of the Institute For Research on the Economics of Taxation nails the culprit: the tax code.
While income is taxed, there's no additional tax if we spend it. But if we save it, we pay at least one more layer of taxes on the earnings. If we buy stocks, we pay two more layers: on corporate income, and dividends to us.
Social security recipients face killer marginal rates - 65 percent on wage incomes. The working poor pay a combined tax penalty of more than 50 percent.
By contrast, a single tax rate with no double taxation or barriers against investment or savings could add 25 to 30 percent to the stock of capital and raise national income 10 to 15 percent over fifteen years.
Yet another good reason for junking America's crazy tax code.
Those are my ideas, and at the NCPA we know ideas can change the world. I'm Pete du Pont, and I'll see you next time.