Friday, December 18, 2009

Index Income Taxes for Age

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Should a 60 year-old pay the same income tax rate as a 30 year-old? Even if the 60 year-old earns more, (s)he has a much more limited opportunity to save for retirement; a lower rate for an older taxpayer would be just and fair on that ground. Moreover, a lower rate on mature but productive people would encourage more productivity in the economy from which we could all benefit, as opposed to rushing people out of the workforce, impoverishing us all.

Let me propose a reduction in income taxes, either in absolute terms or in the calculation of taxable income, of 3.33% per year above 35 years of age. Under such a plan, a 50 year-old taxpayer would pay 50% of the taxes (or have taxes based on calculated taxable income reduced by 50%) as a 35 year-old earning the same income; after 30 years of incremental reductions, a 65 year-old would pay zero and could continue working and earning, income tax free if (s)he wanted.

Mature people are more likely than younger ones to be conservative, responsible stewards of their own wealth. I believe such a plan would not only benefit the economy generally by encouraging more productivity where it is at once so ripe and so sorely needed, but it would also alleviate the looming retirement / Social Security crisis.

Your comments please.