IRA Swaps Could Cost U.S. Billions in Tax Revenue (big bonus for top 1%)

[UpInArms]

http://www.nytimes.com/2006/05/16/business/16tax.html?ex=1305432000&en=f3642f41ec97cc66&ei=5088&partner=rssnyt&emc=rss

President Bush is scheduled to sign into law on Wednesday an extraordinary deal for high-income people with retirement savings accounts.

By paying $1 in income taxes before the taxes are due, these investors may be able to avoid future taxes equivalent to $3.50.

The deal is a one-time opportunity in 2010 for anyone to convert a conventional individual retirement account, where taxes are deferred until money is withdrawn, into a Roth IRA, where investment gains are tax-free. Conversions are now limited to people who make less than $100,000 a year.

One expert, the first of what is expected to be a herd promoting Roth plans, is showing how modest sums put into Roths can produce an enormous bounty over time.

Those who do not take advantage of the opportunity to roll money into a Roth may think about the deal differently. The tax savings, like all of the Bush tax cuts, would be financed with federal borrowing, adding to the government's interest expense.

...more...

[not_nameless]

1. first

someone making $100,000 is not rich, second, this assumes that Congress will not tax Roth IRAs 20 or so years from now. I simply don't trust them given the budget problems, SS, and the fact that all it takes a few lines inserted in a bill

[mac56]

7. "someone making $100,000 is not rich"

Reeeeeeeeeeeeeeeealllly?!

Compared to me, they sure are.

[bleedingheart]

12. $100,000 is probably the average family income for two working

professionals.....hence the middle class.

There are loads of folks in that range and it is what I consider the upper middle class...

[mac56]

14. $100,000? The average?!

Not in my world, baby.

[ShockediSay]

2. It's the wealthy ruling elite

who come out on top again, at the expense of all Americans

[anotherdrew]

3. why should they get to avoid taxes they'd always planned to pay? n/t

[tsuki]

4. Because he's running out of ways to cut taxes for his base to

retain his popularity? Why doesn't he just make a law that only wages for those making between 20-100K are taxable? Everyone else is exempt.:eyes:

[bleedingheart]

5. Hey folks...Roth IRA's are geared towards those in the middle class

there are caps on Roth's after a certain income limit....so the richer you are ...the less or almost nothing you can invest in them.

I recommend getting into a Roth if you can because it can help augment your social security, and other investment income.

You are limited to $4000 per year per individual but even a simple $50 month towards a Roth might make you a bit more comfy in the future.

I also think that the government will change its mind on these babies in the future...so the sooner you get in...the better off you are and you will likely be grandfathered in when they eliminate the Roth's benefits...

[mac56]

8. $50 a month?!

Yeah, right. Guess I'll stop paying my country club fees.

:sarcasm:

[bleedingheart]

10. why are you being sarcastic?

with the demise of the pension, people have to start looking at other ways to save money over just savings accounts and CD's...

My father made between $7,000 and $14,000 a year from 1965-1980 (when he died) ...and he and my mom managed to pay off their house in 7 years, and put enough money away in the bank that when he died (I was a kid)...we were not out in the streets...and my mom was able to stay home with us until I was 13 and she could get work while I helped at home...and she was still managing to squirrel away cash...today she is a retiree living comfortably.

[mac56]

13. I'm very happy for them and you.

Perhaps I'm being sarcastic.

And perhaps you're being a bit insensitive to those who can't afford investments because we're living paycheck to paycheck.

Peace.

[not_nameless]

16. sorry but $50 a month is doable

if you work an extra hour a week, got a second job, or went to school.
Your DU posts would not be over 10,000 though...

[mac56]

17. You know nothing about my circumstances.

Until you do, I suggest you keep the paternalistic attitude to yourself.

By the way, welcome to DU.

[Ragin_mad]

6. This doesn't go into effect until 2010

By then we will control the White house and both houses of Congress and can repeal it.

[stevekatz]

9. This is a good thing for

Middle income people, I started a Roth from the start when I was 19 years old, so It doesn't help me at all. IRAs are not tools for the wealthy because your capped at the amount your allowed to invest.

It would be a sorry day for the democratic party to repeal a tax cut that helps the average middle income wage earner retire safely

[bleedingheart]

11. it will be devastating deficits and severe economic problems

that will end up killing the tax bennies of the Roth...

When the government needs fed...it gets ravenous...and with the record deficits left unpaid ...it could happen

[JPZenger]

15. Short term gain to Feds, long term loss

The article describes how the rule will raise Federal income tax revenue in the short term, but cost the Feds much more in the long term.