A proposal for a flat tax on retirement account withdrawals

[TripleLindy]

You are almost certainly right. If your first dollars on your withdrawal are taxed at less than 12%, this is bad for you. It would definitely be bad for me as right now I'm converting at 0% and 10%. Wiz is kind of right that it's the marginal rate, but on your first dollars, not last or additional dollars withdrawn.

Doesn't matter, this is not a real proposal being considered.

Yes, when I initially read the 12% idea, it sounded good. Just finished my taxes yesterday and realized I’m paying well below that rate.

 

[OldShooter]

As the OP, I am curious as to what you think what drugs I would be on , for simply posting a proposed idea from someone who is a best selling author (according to the New York Times) in the personal finance realm, and linking to the research he did on why he is proposing the idea, for anyone to evaluate and agree or disagree. Please show me what I specially posted in my original post that led you to this thought process.

It seems that some folks find it impossible to discuss policies without making it personal, but I guess that is the world we live in today .

Sorry, I was trying to be clever and also to underline the (IMO) political impossibility of a flat tax being enacted.

 

[MarieIG]

I would probably go further and propose allowing the transfer of percent/ amount of funds from traditional IRAs to HSAs, to allow for more contributions to long term care and medical necessary and chronic illness care - with the goal of improving medical care for those who need it.

 

[NW-Bound]

At this rate, all taxes will be abolished next decade, AI robots will do all the work, and Uncle Sam will print and distribute a stack of Benjamins to each of us every day. What a great country!

But what would we need money for? To pay the robots? What would robots do with the money?

 

[pjigar]

Flat tax would penalize people who have less money who would have paid even less tax than a flat tax. Regressive tax policy IMHO. No go.

 

[gauss]

Submitted, for your discussion, in the retirement zone ...

Your thoughts? I do not have a current feeling one way or the other. It is easy for me to run after something like this that would clearly be to my benefit. But I always try to take a wider view of things. Certainly, from a numbers perspective, there are many who would not benefit, and it might be seen as "helping those who do not need help". While I would be one to likely increase withdrawing from my tIRA or 401k before RMD time if they were taxed at a lower rate, I likely would not put all of what I withdrew back into the economy via increased spending - I might see it as a way to shift more moneis into my taxable accounts, which would only help me an our heirs. For now, this is just a proposal that I find "interesting", and am curious what others might think of it.

My fear that pulling a stunt like this would give the Gen-Z crowd all the motivation that they would need to pull the plug on their collective grandparents Social Security without batting an eye.

Seems self-serving and tone deaf IMHO.

-gauss

 

[Koolau]

My fear that pulling a stunt like this would give the Gen-Z crowd all the motivation that they would need to pull the plug on their collective grandparents Social Security without batting an eye.

Seems self-serving and tone deaf IMHO.

-gauss

I think we still out vote Gen-Z.

 

[target2019]

I think we still out vote Gen-Z.

Boomers cast 32% of the votes in last national election. We may outvote Z, but X + Z does not favor we.

 

[Andre1969]

Boomers cast 32% of the votes in last national election. We may outvote Z, but X + Z does not favor we.

This isn't necessarily a Boomers vs Gen Z, X, Millennials or whatever competition, but rather an age cutoff thing. While the Boomers themselves are getting older, and their size will gradually diminish with age, more and more of the Gen-Xers are spilling into that 60-and-over group that this proposal will benefit.

Younger people may be all for sticking it to older people, whom they might feel had it to easy. But once they become the older people themselves, you can bet they'll change their tune fast!

 

[TripleLindy]

Another idea being pushed by Ted Cruz and Tim Scott is to index the purchase price of assets to inflation for capital gains purposes. Additionally, the proposal includes raising the exemption from home sales to $1m for couples, and eliminating capital gains tax on home sales to first time home buyers or selling rental properties to home owners.

The suggested purpose is to free up the housing market. I don’t understand the logic of including the inflation index to assets like stocks if that’s the case.

 

[Al18]

This is a solution, searching for a problem that doesn't exist.

Don't let the tax tail wag the dog.

 

[Dtail]

Another idea being pushed by Ted Cruz and Tim Scott is to index the purchase price of assets to inflation for capital gains purposes. Additionally, the proposal includes raising the exemption from home sales to $1m for couples, and eliminating capital gains tax on home sales to first time home buyers or selling rental properties to home owners.

The suggested purpose is to free up the housing market. I don’t understand the logic of including the inflation index to assets like stocks if that’s the case.

Another losing idea.