Max Baucus: We Need To Raise Taxes Fairly, But Leave Existing Roth IRAs Alone – InsuranceNewsNet

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October 13, 2021 Newswires No comments
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Max Baucus: We Need To Raise Taxes Fairly, But Leave Existing Roth IRAs Alone

Milford Daily News, The (MA)
By Max Baucus

When I chaired the Senate Finance Committee off and on from 2001 to 2013, I both lowered and increased taxes. Cutting taxes was easy and fun – like when we first made the child tax credit partially refundable in 2001.

Raising taxes was not, and at the Finance Committee we worked hard to make sure that the tax bills we wrote were fair. Fair to the people who sent us to Congress, whether they voted for us or not. We debated the provisions openly, and I applied the committee rules evenly. And we did not change the rules in the middle of the game on taxpayers.

The president and Congress are engaged in a Herculean effort to stop the spread of COVID-19, boost our infrastructure and tend to enormous social needs. And paying for it! No one likes tax increases. But taxes are somewhat more palatable if they are perceived as fair. Everyone roughly pays their fair share. And the process by which taxes are increased must be fair.

As Congress figures out how to pay for the large bill called reconciliation, increased taxes on the wealthy should be on the table. Even so, these tax increases should be fair. That means any new taxes imposed by Congress should apply to the future, and not to the past. Americans who relied on the law when they made their investment decisions should not be subject to retroactive taxation.

That's how Sen. Chuck Grassley, R-Iowa, and I operated on Republican bills, Democratic bills and bipartisan bills.

In 2002, we became aware of U.S. companies who "inverted," moving their headquarters on paper to another country to lower their tax rate. But we didn't change the law on them retroactively. We announced that we would be taxing such companies as U.S. companies even though technically their parent company was foreign. But the new law applied only prospectively. Those who inverted prior to the law change were not impacted.

In 2009 and 2010, Democrats fully paid for the Affordable Care Act, and half of those offsets were tax increases, including new taxes on investment income. None of the increases were retroactive. They were only applicable to income earned after the law took effect, and we did not change the rules to require changes in accounts that triggered income tax.

In the current House tax bill, however, several of the proposals for retirement savings accounts are retroactive, punitive and confiscatory. Let me explain. The bill requires distributions of certain amounts in individual retirement accounts and then taxes those distributions.

When hardworking Americans put funds into a traditional IRA, they expect that they can leave the funds in the IRA until they begin withdrawals at age 72. Because that was the law. And the benefit they received for socking the funds away was no tax on any appreciation until the funds were voluntarily withdrawn. Traditional IRA holders expect their withdrawals to be taxed when they decide to withdraw. Not earlier because the government has suddenly changed the rules.

With rising income inequality, it makes sense to raise taxes on the wealthy, even on some of their retirement income, to help pay for the legislation. A prospective effective date would lessen the confiscatory effect of the pending proposals. That would be more fair. It would engender trust, not undermine it. As Secretary of State George Schultz once said: Trust is the coin of the realm. Taxpayers must be able to trust that Congress will honor its promises, especially for those saving for retirement.

Max Baucus served as a U.S. senator from Montana from 1978-2014. A member of the Democratic Party, he was the longest-serving senator in Montana history. Baucus served as chairman of the Senate Finance Committee and as the U.S. ambassador to China under the Obama administration.

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