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

07.03 George Lakoff: Why Pope Francis Killed It on Addressing Climate Change

07.03 This dome in the Pacific houses tons of radioactive waste – and it's leaking

07.03 Jairam Ramesh: India can't remain on the path of further destruction

07.03 Greenpeace and utilities launch suit against Hinkley nuclear plant

07.03 New study warns of dangerous climate change risks to the Earth’s oceans [ginormous graphic]

07.03 BP set to pay largest environmental fine in US history for Gulf oil spill

07.02 Australia must cut carbon emissions by 30% by 2025, says Climate Change Authority

07.02 Germany to mothball largest coal power plants to meet climate targets

07.02 Supreme Court Decision Unlikely to Stall the Shift Away from Coal Plants

07.02 Hope for Alzheimer's treatment as researchers find licensed drugs halt brain degeneration

07.02 The Death Treatment

07.01 Rich countries' $100bn promise to fight climate change 'not delivered'

07.01 Climate change a security risk second only to terrorism, says defence report

07.01 China makes carbon pledge ahead of Paris climate change summit

07.01 Brazil announces massive reforestation and renewable energy plan with US

07.01 Are we on the brink of an electric car revolution?

07.01 Billions have no access to toilets, says World Health Organisation report

News Media

07.02 This despicable “O’Reilly Factor” segment exposes the fundamental ugliness of the right-wing worldview [5:24 video]

07.01 How Chris Christie trapped himself in a political quandary [A paper-of-record spreads an old Social Security lie]

Daily FAIR Blog
The Daily Howler

US Politics, Policy & 'Culture'

07.03 Elizabeth Warren Reams Private Accreditor Who Certified Corinthian College Up to Its End [6:17 video]

07.03 Economic exodus means two-thirds of Puerto Ricans may soon live in US

07.02 America’s worst governors want to be president: Jindal, Walker, Christie — can Sam Brownback be far behind

07.02 Bernie Sanders draws crowd of 10,000 at Wisconsin rally[2:59 video]

07.01 How Chris Christie trapped himself in a political quandary [A paper-of-record spreads an old Social Security lie]

07.01 KKK plans South Carolina rally as Confederate flag debate continues

07.01 How Seattle Is Reclaiming Its Waterfront From an Elevated Urban Highway

07.01 Affordable Housing Crisis Grows Across the Country as Apartment Rents Skyrocket

06.30 Wealth Doesn't Trickle Down, But the Effects of Housing Discrimination Do

06.30 What's Really Happening in Puerto Rico? [As with Greece, expect mass population shift to avoid local government debt-service taxes]

06.30 The GOP Fails Its Empathy Test

06.30 Barack Obama moves to double US salary limit on overtime pay

06.29 Bernie Sanders can give America what it needs: Some good old-fashioned class warfare

06.29 Puerto Rico’s Governor Says Island’s Debts Are ‘Not Payable’

Justice Matters
High Crimes?
Economics, Crony Capitalism

07.03 Europe’s Many Economic Disasters

07.01 How the euro became a weapon of mass destruction

06.30 Robert Reich: America is facing an economic apartheid

06.30 Europe’s Attack on Greek Democracy

06.29 The economic plan that could save America (but scares conservative billionaires senseless)

06.29 Report: Millions of dollars in fraud, waste found in charter school sector [a BIG overlooked story of the failure to sensibly regulate]

06.29 The world is defenceless against the next financial crisis, warns BIS

International

07.03 Boko Haram attack on Nigerian village leaves nearly 100 people dead

07.02 Nicholas Winton, Rescuer of 669 Children From Holocaust, Dies at 106

07.02 Weak Power Grids in Africa Stunt Economies and Fire Up Tempers

07.02 Greece's economic crisis: 100 Greeks give their view

07.02 Hillary Clinton emails reveal powerful families' intricate relationships

07.02 Attacks on Egyptian checkpoints signal escalation in Isis capabilities

07.02 Islamic State threatens to topple Hamas in Gaza Strip in video statement

07.01 A Paradox of American Religion: Diversity Brings Tolerance [Obvious countries should learn from this!]

07.01 The United Nations in a Post-Nation World

07.01 Prime Minister Signals Greece May Accept Bailout Terms

07.01 The Hard Work of Taking Apart Post-Work Fantasy

07.01 Iran's nuclear program may have cost the country $500 billion or more

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: