packrat44
Thinks s/he gets paid by the post
I don't think this could really happen. If your SWR is, say, $100K (4% of $2.5M), that would be your income for the year. I don't see any realistic way that $2.5M could be manipulated to create a taxable output that would eat up more than the ~15-20% of taxes that $100K income would ordinarily create. Remember, some of that is probably going to be cap gains at a lower rate than ordinary income. Also, with any forethought you should be able to manipulate your drawdown to minimize taxes. It's fun, gives you something to do in retirement.
Maybe if you described a scenario that would realistically create the dilemma you are worried about we could address it better.
It can happen, at least in the short run. Federal income taxes alone exceed 100% of my SWR for tax years 2010; 2011; and 2012. This is due to large conversions from TIRA to RIRA.