Newspaper logo  
 
 
Local News & Opinion

Ref. : Civic Events

Ref. : Arts & Education Events

Ref. : Public Service Notices

Travel
Books, Films, Arts & Education
Letters
Open Letters:

Ref. : Letters to the editor

Health Care & Environment

04.17 Five years after the Deepwater Horizon oil spill, we are closer than ever to catastrophe

04.17 Supreme Court hears call to force UK government to meet air quality laws

04.17 Mary Robinson: Developing nations must move rapidly beyond fossil fuels

04.17 Paraguay activists ensure government's oil ambitions will be no walk in the park

04.16 Milk teeth of Irish famine's youngest victims reveal secrets of malnutrition

04.15 Alzheimer's study finds possible cause of disease

04.15 The $5 Billion Race to Build a Better Battery

04.14 Making Sense of Water

04.14 Scrap fossil fuel subsidies now and bring in carbon tax, says World Bank chief

04.14 China's coal imports fall nearly half in 12 months as anti-pollution drive bites

News Media

Daily FAIR Blog
The Daily Howler

US Politics, Policy & Culture

04.17 Martin O'Malley takes shot at Clinton over gay marriage and immigration

04.16 We Don’t Need Another Permanent Tax Cut For Millionaires And Billionaires [chart]

04.16 The Retro Future

04.16 John Oliver: The IRS [18:26 HBO video]

04.16 State Income Tax Brackets Charted [info graphic]

04.16 Among developed nations, Americans’ tax bills are below average [info graphic]

04.16 Do Federal Taxes Reduce Income Inequality? [3:06 Vox video]

04.16 1.4% Price Rise to Pay Wal-Mart Employees A Living Wage Gets Them Off Food Stamps, Saving Taxpayers $13 Billion Per Year [2:02 video]

04.16 Hillary Clinton evolves on gay marriage, just in time for presidential campaign

04.15 Fight for $15 swells into largest protest by low-wage workers in US history

04.15 What a $15 minimum wage means for US small businesses

04.15 Wall Street’s Stealth Tax Break

Justice Matters

04.17 Republicans show support for criminal justice reform in rare bipartisan push

04.16 World Bank breaks its own rules as 3.4 million people are forced off their land

04.16 General Motors protected from faulty ignition-switch lawsuits, judge rules

04.15 The Myth of Police Reform

04.13 Former Blackwater guards sentenced in massacre of unarmed Iraqis

04.13 Nina Ricci heir convicted of tax evasion in France with help of HSBC

04.09 The Shockingly Familiar Killing of Walter Scott

High Crimes?

04.15 Turkey cannot accept Armenian genocide label, says Erdogan [Armenians must have killed and buried themselves!]

04.13 800,000 children in Nigeria 'running for their lives', says Unicef

Economics, Crony Capitalism

04.17 Elizabeth Warren Throws Down Gauntlet, Calls for Genuine Financial Reform [36:48 video, she begins @ 2:51]

04.17 Chris Christie: New Jersey Pension Launches Probe Of Fees to Wall Street

04.17 World Water Forum needs to be more than just a trade show for privatisation

04.16 Nasa-funded study: industrial civilisation headed for 'irreversible collapse'?

International

04.17 The Vietnam War, as Seen by the Victors

04.17 Xenophobia in South Africa: 'They beat my husband with sticks and took everything'

04.16 Finland after the boom: 'Not as bad as Greece, yet, but it's only matter of time'

04.13 Smart Girls vs. Bombs

04.13 Is Iran Revolutionary?

04.13 Vladimir Putin authorises delivery of missile system to Iran

04.12 Who Do You Protect, Who Do You Surveil?

04.12 Urban farming at a Singapore retirement home: 'It is not a seniors' labour camp'

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: