What America Needs is Real Tax-Free Savings (Sixth in a Series)

Everyone agrees that personal savings is essential. So why do we tax it?

"A penny saved is a penny earned."
-- Benjamin Franklin

by Rod D. Martin
August 9, 2004

Everyone agrees that personal savings is essential, for families and for our economy.

So why do we tax savings?

A tax acts as a penalty. A capital gains tax, for example, penalizes capital formation or investing. A tax on savings discourages people from squirreling their money away, precisely what we want to encourage.

Put another way, when you tax something, you get less of it.

And just to make matters worse, when John Kerry and his Beltway buzzards swoop down on your savings, they're taxing money they've already taxed. Not content with chowing down on your paycheck, Uncle Sam arrives for seconds, devouring your return on what's left.

In my series of articles on why America needs a flat tax, I've suggested five key changes that must be made if we're ever going to escape the blood-sucking horrors of double taxation. But on one point, the President is way ahead of everyone.

Earlier this year, President Bush i…