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08.15 RIDE FOR THE OVERRIDE

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Health Care & Environment

08.23 Can New York City Waterproof Its Subway?

08.23 Report Shows Whopping $8.8 Trillion Climate Tab Being Left for Next Generation

08.22 Historical documents reveal Arctic sea ice is disappearing at record speed

08.22 Iraqi children pay high health cost of war-induced air pollution, study finds

08.21 The Link Between Health Spending and Life Expectancy: The US is an Outlier [the U.S. is the only 'advanced country' with for-profit healthcare without price controls...]

08.21 'Paradise Lost': How To Help Our Oceans Before It's Too Late

08.21 Dieselgate in Europe: How Officials Ignored Years of Emissions Evidence

08.21 Louisiana floods: state faces soaring recovery costs and disease concerns [related: Louisiana Loses Its Boot]

08.20 It’s Not Just Texas. Maternal Deaths Are High Across The U.S. [how do U.S. Blue States compare to Red States?]

08.20 Elon Musk leads Tesla effort to build house roofs entirely out of solar panels

08.20 Coincidence? Texas Slashed Women's Health and Maternal Death Rate Soared

08.20 'BernieCare' Can Save ObamaCare

08.20 As Louisiana Floods Rage, Republicans Are Blocking Modest Climate Action

08.20 Dakota Pipeline Construction Halted Amid Ongoing 'Defiance of Black Snake'

News Media Matters

Daily: FAIR Blog
The Daily Howler

US Politics, Policy & 'Culture'

08.23 The Clintons’ ethics test: Government watchdogs weigh in on the Clinton Foundation’s latest maneuvers

08.23 One Answer to School Attendance: Washing Machines

08.23 Twenty Years Since Welfare 'Reform'

08.23 Clinton’s Transition Team: A Corporate Presidency Foretold [the 'assumed' proviso should be said and promised: "...if it helps the public...]

08.22 Why Donald Trump is Reaching Out to Black Voters [an appeal to gain votes from ALL the uninformed and uneducated]

08.22 What We Can—and Can't—Learn From the Floods in Baton Rouge

08.22 How Chicago Youth View Police, From School to the Streets

08.22 Chicago's Inescapable Segregation

08.20 Hillary Clinton’s Ethics Problems Are Worse Than She Understands

08.20 Hillary’s Neoconservatives

08.19 Vote for the Lying Neoliberal Warmonger: It’s Important

08.19 11 Dangerous Right-Wing Kooks, Cranks and Operatives Surrounding Donald Trump

08.19 US justice department announces it will end use of private prisons

08.19 Ukrainians saw Paul Manafort's political impact up close – and it wasn't pretty

08.19 The lies Trump told this week: from opposing the Iraq war to San Bernardino

Justice Matters

08.22 Mapping 'Pre-Crime' in Rio

High Crimes?

08.23 UK in denial over Saudi arms sales being used in Yemen, claims Oxfam [US too...]

Economics, Crony Capitalism

08.22 As Resistance Mounts, TPP Becoming 2016 Election's Third Rail

08.21 The death of neoliberalism and the crisis in western politics

08.21 Trump and Clinton's free trade retreat: a pivotal moment for the world's economic future

08.20 U.S. Army fudged its accounts by trillions of dollars, auditor finds

08.20 'Flash Boys' IEX stock exchange opens. Its goal: Rein in high-frequency traders

08.20 'Good to Be King': The Very Good Loans Key Lawmakers Get from Wall Street Banks

08.19 Sanders: Aetna's Obamacare Threat Shows What "Corporate Control Looks Like"

08.19 Sanders Condemns Obscene Levels of Inequality Documented in New CBO Report

International

08.23 Congress Must Take Action to Block Weapon Sales to Saudi Arabia

08.22 Israel planning new Squatter settlement near Bethlehem to ‘cut Palestine’s West Bank in two’

08.22 A Lawless Plan to Target Syria’s Allies

08.22 After 10 Years, US B-52H Resumes Operations in Afghanistan [is killing more, faster our policy objective?]

08.22 In Response to Indiscriminate Saudi Bombing, MSF Evacuates Northern Yemen

08.22 Anti-Austerity Leftist Announces Challenge to French President Hollande

08.22 Philippine police anti-drugs operations have killed 712 since July, Senate hears

08.21 ‘Criminals are the law in Syria’

08.21 This helpful chart reveals if a robot is coming for your job

08.21 A regime of networks but no clear leaders: Why Iraqis fear victory

08.21 Sadiq Khan: We cannot win with Corbyn... so I will vote for Owen Smith

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  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.



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This story was published on December 18, 2012.

 

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