Summary of Savings Proposals (tax rate on RICH drops to max 4%)

[papau]

Summary of Savings Proposals Issued by the President's Advisory Panel on Tax Reform

Save at Work Accounts
........Replace all employer-sponsored salary reduction plans . One version of the proposal would only permit after-tax contributions. Current-law contribution limits would apply. Simplified nondiscrimination rules similar to ERSA and simplified safe harbor (50% match up to 6% of pay). Qualified trusts subject to limits and rules similar to 401(k). Custodial accounts allowed for plans with 10 participants or less. Proposals to encourage automatic enrollment would be included.

Save for Retirement Accounts
.........Replace all IRAs (deductible, non-deductible and Roth). Also replace deferred annuities and executive deferred compensation. Annual after-tax contributions up to $10,000 permitted and no income limits on contributions. Distributions by individuals age 58 and older would be tax-free and rollovers would be allowed. Early distributions would be subject to an additional 10 percent penalty tax, with no exceptions. No minimum required distributions rules would apply. Existing IRAs could remain in place or be converted to Save for Retirement Accounts, but no new IRA contributions would be permitted.

Save for Family Accounts
.........Replace education IRAs, section 529 plans, HSAs and FSAs. Existing accounts could be converted. Annual after-tax contributions up to $10,000 and no income limits on contributions.Distributions for family education costs, medical expenses and purchase of a primary residence would be tax-free. All distributions by individuals age 58 and older would be tax-free regardless of the purpose. Combined with the Save for Retirement Account, a couple could save up to $40,000 annually without a plan. Prior to age 58, up to $1,000 per year could be withdrawn tax-free for any purpose. Other distributions not qualified would be subject to a 10% penalty tax. No minimum required distributions.

SAVER's Credit
..........Current law credit replaced with an annual 25 percent credit up to $2,000 in contributions ($500 maximum credit). Phased out ratably for families with adjusted gross income between $30,000 to $40,000. Credit is refundable (i.e., paid to taxpayer regardless of whether there is any tax liability). Applies to contributions to any of the accounts, but if contributions are made to the Save for Family Account, no nonqualified withdrawals (i.e., the $1,000 annual exception) would be permitted. SAVER's credits would have to be deposited into either a Save for Retirement Account or a Save for Family Account that did not permit nonqualified withdrawals.

Nonqualified Investments
..........One proposal would permanently extend the 15 percent tax rate on capital gains and dividends. Another proposal would exclude from tax 100 percent of dividends paid by US companies on domestic earnings and 75% of capital gains on the sale of US stock (making for a 8.25% maximum effective tax on capital gains). Since it will be fairly easy to create trusts and mutual funds to maximize the tax benefits, we can expect funds (including both dividends and capital gains) in such funds to have an effective tax rate of less than 4 percent.

[leveymg]

1. You want revenue? Eliminate trust funds.

Also, we could go back to the World War Two tax schedule: a 90% nominal rate on incomes of more than $1 million ($100,000 back then). The economy didn't collapse from the top down then, and it wouldn't now, if we taxed the rich.

[papau]

2. I agree - the above was sent to me from a agent of one of the major

financial outfits.

I do like a max 4% rate on the Rich provided they do not earn a wage.