Newspaper logo  
Local Stories, Events

Ref. : Civic Events

Ref. : Arts & Education Events

Ref. : Public Service Notices

Books, Films, Arts & Education

Ref. : Letters to the editor

Health Care & Environment

03.24 Time running out to save the Earth's plants and animals

03.23 'Dead zone' in Gulf of Mexico will take decades to recover from farm pollution

03.23 EU in 'state of denial' over destructive impact of farming on wildlife

03.23 The ban on assisted death ignores the reality of illnesses like dementia

03.23 Lignite mining: Greece’s dirty secret - in pictures

03.22 Interview: Paul Ehrlich: 'Collapse of civilisation is a near certainty within decades'

03.21 THE BATTLE FOR PARADISE [renewable energy is obviously essential for rebuilding]

03.21 London air pollution activists 'prepared to go to prison' to force action

03.21 London air pollution activists 'prepared to go to prison' to force action

03.21 Subsidy-free renewable energy projects set to soar in UK, analysts say

03.21 'Catastrophe' as France's bird population collapses due to pesticides

03.21 A judge asks basic questions about climate change. We answer them

News Media Matters

03.22 Bernie Sanders: Russia and Stormy Daniels distract us from real problem of inequality

Daily: FAIR Blog
The Daily Howler

US Politics, Policy & 'Culture'

03.24 The Gun Control Debate: What Debate? [let's disarm playing Rambo]

03.24 The Radical Proposal That Moderate Democrats Should Be Running On

03.24 March for our Lives protests planned for 800 places across the world

03.23 Our manifesto to fix America's gun laws

03.22 Mick Mulvaney manipulated data to justify “tip-stealing” rule: report

03.22 Crooked Together: Two Equally Corrupt Parties Bent In Different Directions [the Sanders-Warren progressives are the standout exceptions]

03.22 'We Need Medicare for All,' Says Warren, But Until That's Achieved Her New Bill Aims to Curb Pain of For-Profit System [4:10 video]

Justice Matters

03.23 In court, Big Oil rejected climate denial

High Crimes?

03.23 Amnesty International slams Western arms sales to Saudi Arabia and allies in Yemen war

Economics, Crony Capitalism

03.20 Russian Roulette review: as Joe Biden said, 'If this is true, it's treason'

International & Futurism

03.24 Yes, John Bolton Really Is That Dangerous [why bring fire to the table when tensions are cooling down?]

03.24 Number of Starving People Surged to 124 Million Last Year Because "People Won't Stop Shooting at Each Other," Says UN Expert

03.24 Canada: more arrests as protest against oil pipeline expansion heats up

03.23 Trump Picks 'Unhinged Advocate for World War III' John Bolton as New National Security Adviser

03.23 At last, good news on Brexit: Britain is heading for Norway


03.22 The evil genius of Cambridge Analytica was to exploit those we trust most [the sociopathic modus operandi of The Trump Organization and Cambridge Analytica are suspiciously identical]

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
This site Web
  Print view: IRA Sweet Spot Could Lift America

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: