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Retiree interest exemptions

I hear about Keogh plans and IRAs that permit workers to set aside up to 15 percent of their gross income tax-free now. But what about the 20 million or more individuals already retired and living off interest from funds that were already taxed once? Congress is considering exempting the first $100 or $200 interest, but that is not much help when interest income is $10,000 or so. What chances are there to exempt $10,000 in interest? T. T.

Practically none. Part of the recent oil windfall profit tax legislation included a provision for increasing the exemption of interest and/or dividends to $200/person -- $400 for couples filing jointly. That is one small step. Retirees over 65 also receive an additional $1,000 exemption. Government planners figure unearned income, such as interest and dividends from past savings, should be taxed higher than income from personal services to "soak the rich." One answer to the declining purchasing power of dollars among retirees is for them to return to work or to learn bartering and do-it-yourself skills that avoid spending.

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