Monday, July 5, 2010

WSJ Shills For IRS

"Congress wouldn't tax Roth IRAs, would it? ... But dozens of less-convinced readers have asked Tax Report about Congress's intentions, and well-known IRA expert Ed Slott says he hears it from consumers and advisers every time he makes a speech: '"If I pay tax to convert my IRA",' they ask, "how do I know Congress won't turn around and take away the benefits?"' ... Without a crystal ball, it is impossible to answer the question definitively. But the short answer appears to be: 'No Congress won't tax Roth conversions, at least not soon.' And the prospects of longer-term changes isn't deterring experts who are converting their own accounts. ... This particular tax was so hated that it is hard to imagine its return. Michael Graetz of Columbia University, a former top tax official at the Treasury Department, also thinks it is unlikely that lawmakers would enact a wholesale levy on Roth assets. 'That would be like taxing salary twice,' he says. ... They could try to tinker with income definitions for Medicare or Social Security, or perhaps require distributions for Roth owners. They might even tax an account's earnings if either the earnings or the account is above a certain threshold--although these would be such big changes in retirement policy that they don't seem likely, Prof. Graetz says", (LS) Laura Saunders at the WSJ, 19 June 2010, link:

"The thinking was that the rush to grab tax-free income down the road would raise a $6.4 billion windfall. ... Government mistrust is another factor. A TD Ameritrade survey found that 36% of ideal candidates for conversion suspect that Washington will somehow change the rules later to help reduce the national debt, partially at Roth IRA holders' expense", JR Brandstrader at Barron's, 18 January 2010, link:

What fools these experts are. I expect, one way or another, Roth IRAs to be taxed. LS apparently selected IRS shills as her "experts" in this piece. Having read a few of his articles, I think Slott a clown. Taxing salary twice? We tax: estates and social security. You pay sales taxes on items bought with after-tax income. Why not Roths? We may get increased taxes on the rich, i.e., those making over say $250,000 a year. Why not tax Roth accounts over say $1 million by "imputing "distributions to their holders? See my 2 January 2009 and 5 May 2010 posts: and

The Roth IRA conversion law was changed to increase taxes.


Anonymous said...

Well we gotta raise federal revenue somehow to pay for our warmongering... why not Roth IRAs?

American Delight said...

@Anonymous...And to pay for "universal" health care, "stimulus" spending, social programs, and debt service.

Anonymous said...

Taxing IRAs is an obvious direction, however I suspect that by the time "they" get to it there might not be enough value in them to make it worth the effort.

A "busted" dollar (inflation) plus poor economy could destroy most of the value in IRAs. Picture something like the recent market decline, only 100 times worse.

After this, a one million dollar IRA would only be
worth $10k. Complete confiscation of these wouldn't
amount to enough to make any difference in trillion dollar deficits.

So taxing IRAs is possible, but I'd be more worried of inflation and tax increases outside of IRAs.

Independent Accountant said...

You need not put bonds in an IRA. You can put natural resources oriented mutual funds in an IRA for inflation protection. That said, I agree with you, inflation will hurt dollar denominated investments over the long-term.


Anonymous said...

My best guess is that *most* IRAs contain the standard stock/bonds mix and very little natural resources stocks.

Now with the last years of stock market decline, I'd guess that a lot gets pulled out of stocks into "safe" bonds.

So, total money grab wise, there won't be a lot there to grab after a large inflation bump. Your IRA may differ...