Socialist envy in print: but that money is ours, ours, I say!

From the LA Times, emphasis added:

Then, in 1997, Congress created the Roth IRA.

In a Roth, taxes are treated the other way around. There’s no tax break on contributions. But from that point on, taxes simply vanish. As long as the account is at least 5 years old, there is no tax on any withdrawals made after age 59 1/2. There’s no requirement that you make a minimum withdrawal — after age 70 1/2, or ever.

All of which makes Roths a perfect “fiscal Frankenstein.” In return for little more than ordinary upfront taxes, Congress waived untold billions in future Treasury receipts. Then, too, Roths could be a drag on the U.S. economy. Since no withdrawals are required, assets can lie idle indefinitely.

For Roth holders, the accounts become a permanent, federally sanctioned tax shelter. For America, they’re a bit like toxic instruments on the nation’s books. Worse, Congress has them on steroids, and President Obama wants to up the dosage.

The limit on annual Roth contributions has risen from $2,000 to $5,000. Persons over 50 can add another $1,000 to “catch up.” That’s a $6,000 per-year maximum, $12,000 for a married couple — triple the original limits.

How dare you, mortal sinner, pay “ordinary upfront taxes” and then treat that money as if it were your own, hiding your treasure from the government hacks who could spend it better than you ever could.

UPDATE: Great minds. Smitty at The Other McCain writes:

Those assets are private property. Letting them lie fallow is a perfectly rational act. If someone perceives the assets a drag, then their perception, not the tax code, needs tweaking.
“federally sanctioned tax shelter”? No, really: it’s what I’m putting away for a rainy day. You know: SAVING. That thing that wise people do.
“toxic instruments on the nation’s books”? How can prudent stewardship be seen as toxic by anyone rational?

Gerald E. Scorse concludes:

Whatever the answer for individuals, there’s little doubt that Roths are wrong for America. They’re Frankensteins, fated to wreak havoc. It’s time to retire Roth IRAs.

No, it’s time to kill the 16th Amendment and come up with a simpler mechanism for funding the government. If the federal government could be trusted not to turn the country into an ATM, then some form of flat tax might be interesting.

From your lips to God’s ears, man.

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2 Responses

  1. I finally started a Roth last year. I’ve never been eager, because I didn’t trust the idea that “it’ll never be taxed again.” Never is a long time, and the gov’t is a hungry machine.

    When I commented something to that effect on MotleyFool.com, I got a lot of flack for being an irrational conspiracy type. Then I read about Hungary nationalizing private pension funds, and I thought, hmm.

    Now I read your post. They aren’t claiming they can undo the Roth. They are just complaining about its existence. But still. Can Congress change the law, and tax it anyway, down the line? Do you know of anything preventing this?

    We are still funding the Roth, but there is no. way. that I’ll pay good money to rollover any of the traditional IRA at this point.

    Thanks for the info, PJ.

    • We’re still funding ours, but Argentina siezed retirement accounts a few years ago, too. The precedent is there.

      Re Congressional laws changing, I don’t see why they wouldn’t or couldn’t.

      I’m probably more concerned with military retirements changing for those in active service. Change it for those coming in? Sure. Maybe even for the under-10 year mark, too. But over? Notsomuch.

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