Why U.S. tax policy makes saving a sucker's game

http://www.slate.com/id/2164050/

If I said to you, "You can have $10,000 to spend now—or $9,500 to spend in 10 years," which would you choose? Probably the $10,000 now. And in doing so, you would be making the same choice many Americans make when deciding whether to save or spend their hard-earned cash.

The problem is how we tax investment gains. Over the past 80 years, the average annual return on Treasury bills (a proxy for savings accounts) has been 3.7 percent per year. Inflation, meanwhile, has averaged 3.1 percent per year. This combination has produced a "real return" of a paltry 0.6 percent per year. If you got to keep that 0.6 percent, you might still have an incentive to save: A $616 real gain on $10,000 in 10 years wouldn't be much, but it would at least be $616 more than you have now. Unless you're so poor that you're exempt from taxes, however, or so flush that you can afford to lock up cash for decades in a tax-deferred annuity or retirement account, you won't be keeping that 0.6 percent. You'll be giving all of it—and probably more—to the government.

I thought this article did a good job of demonstrating just one of the consequences of our current tax system. Having just tried to explain to my wife our tax return this year, I'm extremely frustrated - not at the amount I have to pay, but at the lunacy of the system that has been perverted repeatedly by politicians and the brain-off constituency that clamors for more tax revenue and more exceptions at the same time.

Of course, such negative consequences are not the reason we must overhaul our tax system - they are the symptoms, not the disease. Our tax laws violate natural laws, and the result is tyranny.
(see principles 12+13)