Lance Dickie, an editorial writer at the Seattle Times, has an idea for how “Congress and the Obama administration can help rebuild household solvency by rewarding savers.
“Adjust IRS rules so the first $1,000 of interest income is not subject to taxes. Allow tax filers to deduct a grand from their tally of interest earned.
“Quit penalizing people trying to set money aside so they can pay cash for things instead of relying on credit cards. In the universe of skimpy interest rates on plain-vanilla savings and money-market accounts, forgiving the first $1,000 of interest earnings speaks to a healthy amount of cash.”
Click here to read Dickie’s entire column advocating for this income tax deduction on savings.
Since the Federal Reserve has deliberately driven the interest rates savers earn to artificially low levels, anything the government does to boost the effective return on CDs or savings accounts seems like a good and fair idea to us.
Reviving the economy on the backs of American savers, especially those on fixed-incomes who depend on the reasonable interest their hard-earned money should be earning, has gone on long enough.
Let’s just not kid ourselves.
A tax deduction like this will help the wealthiest taxpayers far more than average families.
According to the Tax Policy Center, a Washington research organization, nearly half of all households paid no federal income tax at all this year.
Tax credits for low- and middle-income families have grown so generous over the past decade that a traditional family of four can now earn as much as $50,000 and still have a big fat zero where it says “Amount You Owe” on their tax return.
Another $1,000 deduction won’t matter to them.
The biggest beneficiaries would be the 10% of households with the highest incomes, and that pay nearly three-quarters of all personal income taxes.
They’re the ones always looking for, and taking advantage of, new deductions to lower their taxable income.
Still worth it?
At least until someone comes up with a better idea to right this horrible wrong.