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January 20, 2005

Bush's Plan B

So if the backup plan is to leverage the social security debate to argue for private savings accounts, what's the payoff to Bush's wealthy supporters? Here are some details:

Start with the Retirement Savings Accounts: These would replace IRAs with individuals allowed to put an annual $7500 into accounts that would accumulate tax-free and be distributed tax-free just like Roth IRAs upon retirement.

The payoff to the wealthy would be that all income limits would be removed, where the current rule is that individuals making more than $110,000 per year can't contribute to IRAs.

How about the proposed Lifetime Savings Accounts: Well that's another $7500 socked away, accumulating income tax free and distributed tax-free at any time an individual wishes. Again, wealthy individuals making more than $110,000 per year (the current limit) would be able to use them freely.

And the Employment Retirement Savings Acounts? These are essentially just the consolidation of 401(k)s and other current plans into a single plan operating like a super-Roth IRA. With employer contributions, individuals can receive as much as $41,000 per year in contributions, accumulating tax free and distributed tax free.

So that's a total of $56,000 per year going into accounts that will never again be subject to taxation, no matter how much new income is generated on those accounts.

Oh yeah, and all of these can be passed onto heirs, who also won't have to pay taxes on those distributions.

Social security may be small game compared to removing much of the wealth of the rich from the tax rolls.

Posted by Nathan at January 20, 2005 12:11 AM