President Barack Obama’s budget proposal would cap multimillion-dollar tax-favored retirement accounts like the one held by Mitt Romney, his Republican rival in 2012.
Obama’s budget plan, to be unveiled April 10, would prohibit taxpayers from accumulating more than $3 million in an individual retirement account. That proposal would generate $9 billion in revenue for the Treasury over the next decade, according to a White House statement released today.
“Under current rules, some wealthy individuals are able to accumulate many millions of dollars in these accounts, substantially more than is needed to fund reasonable levels of retirement saving,” the statement said.
The most prominent taxpayer with a multimillion-dollar IRA is Romney, the 2012 Republican nominee and co-founder of Bain Capital LLC. Romney disclosed in public filings during the presidential campaign that his retirement account held between $18.1 million and $87.4 million. At one point, the maximum exceeded $100 million.
IRAs have evolved from a retirement-planning technique into an estate-planning tool for some wealthy families because tax laws allow the accounts to be passed on to heirs, said Ed Slott, an IRA specialist and certified public accountant based in Rockville Centre, New York.
‘Critical Mass’
“Over the last election it hit a critical mass when a lot of people found out that Romney had $100 million in his IRA,” Slott said. “People thought, how on earth did that happen? I think that was the tipping point.”
The Romney campaign didn’t explain how he amassed that much money in the IRA when contribution limits are much lower. Most taxpayers can contribute a maximum of $5,500 for 2013.
One possibility is that Romney included Bain investments valued at close to nothing that later grew exponentially. The value would increase tax-free in the retirement account and would be subject to taxation at ordinary income tax rates when taken out.
Democratic lawmakers, including Representatives Sander Levin of Michigan and George Miller of California, called on the Treasury Department to act.
The administration’s statement didn’t explain in detail how the proposal would work. The cap would apply to the total of all tax-favored retirement accounts.
Slott said the proposal, which wouldn’t apply to most taxpayers, would be difficult to implement.
Obama’s Budget Would Cap Romney-Sized Retirement Accounts
April 5, 2013
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Comments
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Capping savings? Years of cajoling/begging/pleading/dealing to at least try to reduce the rate of spending increases, and then a flippant, arbitrarily chosen amount from a “leader†who can barely put together a budget? Ridiculous. Fortunately, this man will be long gone in 20 years when I retire, and hopefully, so will his policies. “President Obama has said the limit will allow a reasonable return for retirement.†I read this as him wanting to limit not just the total amount, but the return you can get from that amount. Anyone else see it this way this?
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Romney would pay more in taxes by having the Bain investments in his retirement account (ordinary income) than he would have if they were outside his IRA, where they would be taxed as capital gains. We should be happy people are amassing huge IRA accounts as that means eventually the country will collect a large amount of tax revenue on those accounts, and with stretch IRA rules those could add revenue to the government coffers for a two generations.
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The problem I see with the text is that there are government officials with lifetime pensions and unequaled benefits granted to them (and voted for and approved BY them) for what could be a minimum term in office yet they dare to even suggest what retirement should look like for the rest of us (most of whom are life long hard working citizens) ?!!! Who is to say what "reasonable retirement" should be or look like. Like most I'm sure, I was brought up believing that getting an education and working hard for as long as you can EARNS you the right to enjoy a good retirement. I find it decidedly UN-AMERICAN to even consider an alternative to that way of thinking let alone to suggest that some politician(s) would have the nerve to assess or presume to decide what type of retirement I'VE EARNED.