https://www.cato.org/blog/penalty-american-savers-how-usas-fix-it
September 26, 2024 9:44AM
The Penalty on American Savers and How USAs Fix It
By Adam N. Michel and Joshua Loucks
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For many young and low-income Americans, the limits discourage them from using the accounts at all. Americans who use these accounts and then have to access their money early for a family emergency or job loss face new layers of taxes. Many low-income workers are automatically enrolled in these programs by their employers, following government incentives or mandates.
Money deposited in qualified accounts cannot be used flexibly based on an individual’s or their family’s immediate needs. If someone cannot confidently commit to leaving their savings untouched until the government-designated time, it may be wiser for them to avoid using a qualified account altogether.
IRS data show that for the lowest-income taxpayers, penalties for improper use of retirement savings make up a significant portion of their tax liability. Using an average from tax years 2017–2019, Figure 1 shows that 43 percent of all taxes paid by taxpayers with adjusted gross income (AGI) below $5,000 went to penalties for accessing their own money. About 19 percent of income taxes paid by taxpayers with AGI less than $25,000 went to penalties on qualified accounts.
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Why not let Walmart offer “banking services”? Why not allow Credit Unions offer tax free savings? Why aren’t Treasuries (i.e., Bills, Notes, Bonds) tax free like Municipal Bonds?
It doesn’t take a degree in Economics to figure out that America has a “savings problem”. “We, The Sheeple”, responding to incentives, is deeply in debt. No taxes on debt; taxes galore on any kind of savings/
Argh!
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Reinke Faces Life 