Newspaper logo  
 
 
Local Gov’t Stories, Events

08.15 RIDE FOR THE OVERRIDE

Ref. : Civic Events

Ref. : Arts & Education Events

Ref. : Public Service Notices

Travel
Books, Films, Arts & Education

12.08 How Do American Students Compare to Their International Peers?

12.07 What America Can Learn About Smart Schools in Other Countries

Letters

Ref. : Letters to the editor

Health Care & Environment

12.08 Portland's Answer to Climate Denial? Local Action

12.08 Meet the High-Tech Buses of Tomorrow [perhaps smaller, non-polluting buses can come twice as often, too]

12.08 Mapping the Inundation of New York City

12.08 Leonardo DiCaprio meets Trump as climate sceptic appointed

12.08 Trump picks climate change sceptic Scott Pruitt to lead EPA

12.07 Trump’s Infrastructure Plan Is a Full-on Privatization Assault

12.07 Trump advisors aim to privatize oil-rich Indian reservations [drill, pump, burn, breathe, die]

12.07 Thousands of snow geese die in Montana after landing on contaminated water

12.07 Five west African countries ban 'dirty diesel' from Europe

12.07 London mayor to double funding to tackle air pollution

12.07 Donald Trump supports 'clean coal' – but does it really have a future?

12.07 Google, Apple, Facebook race towards 100% renewable energy target

12.07 Google Says It Will Run Entirely on Renewable Energy in 2017

12.05 Trump's pick for key health post known for punitive Medicaid plan

12.05 Asleep at the Wheel: German Leaders at Odds with Industry over Electric Cars

12.05 Dakota Access Pipeline Permit Denied

News Media Matters

Daily: FAIR Blog
The Daily Howler

US Politics, Policy & 'Culture'

12.07 Democrats Need to Embrace Progressivism or Else Move Out of the Way

12.07 Forget Air Force One, Pentagon Wastes Billions and Billions Every Month

12.06 Why Does Donald Trump Lie About Voter Fraud?

12.06 FIGHTING FOR THE POOR UNDER TRUMP

12.06 Want to Bring Back Jobs, Mr. President-Elect? Call Elon Musk [dare to be smart]

12.06 Jamie Raskin Has a Fierce, Funny Message for Dispirited Democrats

12.06 Career of Trump's Top Ethics Lawyer Marred by Questionable Ethics

Justice Matters

12.07 President Obama’s Last Chance to Show Mercy

12.06 Did Trump’s Son-In-Law Finance Israeli Extremists and Illegal Settlements?

High Crimes?

12.05 Sea Shepherd activists set sail for Antarctic to battle Japanese whalers

Economics, Crony Capitalism

12.08 Who Won the 'Make the Most Meaningless Thomas Friedman Graph' Contest? [humor with graphs, because we need some!]

12.08 In the UK, Pfizer and a partner hiked anti-epilepsy drug price 2600% overnight [bring out the guillotine]

12.08 “We’ll Look at Everything”: More Thoughts on Trump’s $1 Trillion Infrastructure Plan

12.04 TRUMP SETS PRIVATE PRISONS FREE

12.04 WHY TRUMP SHOULD SPEND OTHER PEOPLE’S MONEY

International

12.08 After Choi-gate

12.08 France's honest tax system crusader convicted for hiding millions of euros

12.06 FAIR’s big play: Onetime fringe group hopes to drive Donald Trump’s immigration policy

12.06 Brazil's Senate president ousted over embezzlement charges

12.06 Brazil grapples with lynch mob epidemic: 'A good criminal is a dead criminal'

12.06 Before the article 50 court battle, there was May v Merkel

12.06 Austrians celebrate far right defeat: 'the first good election result this year'

12.05 Euro falls to 20-month low after Italy government's referendum defeat

12.05 'A storm is gathering on the horizon': Chinese scholars fret about Trump

We are a non-profit Internet-only newspaper publication founded in 1973. Your donation is essential to our survival.

You can also mail a check to:
Baltimore News Network, Inc.
P.O. Box 42581
Baltimore, MD 21284-2581
Google
This site Web
  Print view: IRA Sweet Spot Could Lift America
FISCAL ANALYSIS:

IRA Sweet Spot Could Lift America

by Gerald E. Scorse
The boomers’ decades of tax deferral are ending, and decades of minimum required distributions are about to begin.

Congress realizes that Medicare and Social Security lie directly in the path of a demographic tsunami. The first wave of baby boomers has already filed for benefits, and alarm bells are sounding on the Potomac.

But a little-noticed fiscal windfall kicks in just ahead. Starting in 2016, untold tax dollars will come streaming into the Treasury as boomers begin taking minimum required distributions (MRDs) from their retirement accounts. Legislators should speed up the distributions, and dedicate the proceeds to shoring up America’s safety net.

The inflow traces back to the 1974 Congressional act that set up individual retirement accounts (IRAs). Numerous offshoots have been added, such as 401(k)s and 403(b)s, but the essentials remain what they were at the start. Contributions are tax-free and gains are tax-deferred. Withdrawals can begin at age 59½; they must begin at age 70½ and continue every year thereafter. Withdrawals, including capital gains, are taxed at ordinary income rates. (Roth IRAs, which have different rules, don’t figure in here.)

The creation of IRAs was a political tour de force that served high social purpose, made economic sense, and appealed to separate self-interests. Through IRAs, the federal government offered millions of American workers their best chance ever to put away some money for the Golden Years. It was money that would let them live a little, not just get by on Social Security. What the government gave up in tax concessions, it could recoup on the other end: a continuous influx of extra revenue, topping off the glow of having done right by the country.

Corporate America cheered for its own reasons. Companies with defined-benefit pension plans quickly realized that defined-contribution IRAs gave them a less expensive way to offer a substitute benefit. Companies lacking pensions suddenly had a retirement plan as well, and it included the allure of potential stock market riches. Wall Street saw green. IRAs promised millions of new customers, endlessly handing over new money.

Now the boomers’ decades of tax deferral are ending, and decades of MRDs are about to begin. As usual the devil is the details, and the details will pack real punch once the paybacks start. Here are three revenue-generating MRD proposals:

Set an earlier MRD date. There’s no good reason to start MRDs at age 70½. A meaningful start date would be age 65: when Medicare begins, so should the tax deferral payback. Congress acted a generation ago to protect Social Security by raising the retirement age in stages; today’s Congress should act to help preserve Medicare by lowering the MRD start date, in stages, to age 65.

Adjust withdrawal rates. The starting MRD for most IRAs is less than 3.7 percent. Twenty-five years later, at age 95, it’s just 11.6 percent. Congress should set the first-year MRD at 5% and recalibrate the rates going forward. Uncle Sam, generous all along, has strong grounds to accelerate account payouts. This step could be made progressive by keeping the current rates for balances below, say, $250,000.

Abolish “stretch IRAs”. Several-generation transfers, now permitted, can extend MRDs into the next century. Passing along wealth is fine, but tax-sheltered retirement accounts shouldn’t become tax avoidance tools. Set a two-generation limit, or a date-certain limit, after which balances must be distributed and taxes paid.

The beauty of these ideas is that they raise revenue without raising taxes. They’re a stimulus as well: all the revenue comes from putting more income in taxpayer hands sooner. Money would flow in not only from boomer MRDs, but from all accounts taking minimum payouts.

President Obama has often called for shared sacrifice. Few would find it easier than those with retirement accounts who willingly waive withdrawals until required, and then take only what they must.


Gerald E. Scorse helped pass the bill requiring basis reporting for stock market capital gains. He writes articles on taxes.



Copyright © 2012 The Baltimore News Network. All rights reserved.

Republication or redistribution of Baltimore Chronicle content is expressly prohibited without their prior written consent.

Baltimore News Network, Inc., sponsor of this web site, is a nonprofit organization and does not make political endorsements. The opinions expressed in stories posted on this web site are the authors' own.

This story was published on December 18, 2012.

 

Public Service Ads: