By JLP | April 20, 2010
I read this letter to the editor in today’s Wall Street Journal:
“In ‘George W. Bush’s 2010 Tax Miracle” (op-ed April 15), Donald L. Luskin suggests that many wealthy owners of IRAs and other tax-deferred retirement accounts will convert their accounts to Roth IRAs ‘in exchange for freedom from taxes forever after on principal, income and gains.’
“Should anyone be so naive to think that this administration won’t later change the rules and begin to tax all gains on Roth IRAs for those families making above $250,000 per year?”
That’s been one of my concerns too. Not so much that Obama would change the rules but that the rules would be changed at some point in the future. Things the government could do to jack things up:
• Force people to include Roth IRA withdrawals in their income in calculating the tax on Social Security benefits.
• Force people to take RMDs from their Roth IRAs.
• Tax withdrawals for people over certain income thresholds.
I know, I know. I sound like a conspiracy theorist. But, don’t think for a minute that the government won’t change the rules. They’ve done it in the past and they’ll do it again in the future. Anytime they see someone supposedly using the system to their advantage, they’ll figure out a way to close the “loophole.”