May
2006
Holiday from Reality
With the United States already facing budget deficits serious enough to endanger its currency, could there be a better time to give away a huge chunk of future revenue?
President Bush and lunatic fringe in his party (a party that still parades itself as the party of fiscal rectitude) see no problem in doing just that. Tomorrow, along with the extension of low capital gains rates, Bush will sign into law a second boon for rich taxpayers that will pick the pockets of everyone else and rob future generations of workers who do, in fact, pay taxes. The provision will allow wealthy people to swap regular IRAs for Roth IRAs, whose subsequent earnings and payouts will never be taxed. Also–and here again is the beauty part that has hardly been reported–a Roth IRA is not subject to mandatory withdrawals like a regular IRA when its owners turn 70. For Roth accounts, mandatory withdrawals apply only to heirs, which means that the accounts’ value will grow tremendously and provide windfalls to the inheritors of those who keep the money invested.
When Roth IRAs were first established, Congress sensibly limited eligiblity to people of moderate means. Currently, the option of converting a regular IRA to a Roth is restricted to individuals making less than $100,000 yearly and couples earning less than $160,000. The reason is that the government wasn’t ready to give away all that future tax revenue from wealthy people. But the new provision throws such common sense aside. It sets up a virtual gold rush in the year 2010, during which anyone can make the switch to a tax-free Roth. The Congressional Joint Committee on Taxation–a body controlled by GOP’s tax-cutting zealots–is shameless in proclaiming that the ten-year impact of this change will be a net gain to the treasury of $6.4 billion, because rich taxpayers will have to pay front-end taxes to convert their money to Roths. A more sober estimate the Tax Policy Center looks at the impact through the year 2049 and sees a net loss to the treasury of $53.3 billion.
Why should we we care? Well, for one thing, the reckless (tax) cut-and-spend ways of the Bush Administration mean that ten or twenty years from now, if not sooner, taxes in general will have to go up significantly if the country is not to go totally broke. That’s when Boomers in numbers will, in theory, start to draw Social Security and Medicare benefits. And guess what? There will then be a group of privileged Americans–those with the wherewithal to seize the Great Roth Giveaway of 2010–who won’t be paying anything as the rest of us struggle with the aftermath of the Bush Binge.
Oh, and there’s one other thing: A lot of those who should be retired in reasonable comfort ten or twenty years from now will be on the streets with their tin cups out. Why? Because according to a report released this week by McKinsey & Co., about half of the people who hope to keep working to supplement their retirement income won’t be able to do so, and thus will find themselves “retired” involuntarily on way less money than they need to survive.
So there you have it: a dystopian future with truly “golden” years for a privileged minority and the prospect of misery for many of their contemporaries. Plus a resentful active workforce being taxed like crazy to pay for the comfort of the privileged group while their own parents in some cases turn to them for support. And all of this because Bush and his crowd choose not to belong to what the president famously called “the reality-based community.” Such delusionals aren’t likely to change. But we can still ask, Where are the Democrats? Why aren’t they in full-throated denunciation mode? Their own pollsters tell them that “basic fairness” matters hugely to Americans. Amazing that with the entire country now fixated on immigrants “sneaking” (Bush’s word) across the border, no one is talking about the millionaires now sneaking their way to an entirely tax-free future.