hornpharmd
5,000+ Posts
At this point it is clear that our government is going to be running large deficits at least for the next 10 years. Both candidates have plans to draw down the deficit. President Obama's plan requires a large sustained GDP growth that just isn't likely to happen based on past growth #s. It will include a small tax bump for the middle class but this should be expected as increased revenue is going to be needed. Only problem there is that since that GDP growth likely won't happen then we are going to either going to need to make much steeper spending cuts than currently planned or taxes will need to go up further. The Romney plans sounds great but without all of the specifics it is impossible to run the #s and tell what the future impact will be. Certainly President Obama has tried to get things done through Congress in terms of spending cuts and tax increases but has been unsuccessful. This is a big reason his deficits continue to be so high. Will Romney be any more successful in getting his agenda passed if he is elected? Point is, that either way it is looking like these large deficits are going to be continue for at least the next decade. They may go down to say 1/2 TRillion/year but that is still a very large deficit. We can all be optimistic about change coming but I am taking a more realistic view to what I see happening over at least the next decade.
So with that backdrop, my discussion point is this:
How will Roth 401ks and IRAs affect tax revenue in the future and how will this affect the deficits? The trend has been for people to put more and more money every year into after tax accounts. Financial advisors are predicting higher tax rates for all in the future in order to fund all of this spending. Thus even though we may be paying 20-30% effective tax rate for the middle class, that could easily be a 30-40% tax rate in a decade or two. And what about in 20-30 years when many of us will actually be retiring. We will have a great tax advantage in the long term by paying the taxes now and getting the money tax free later in life. The problem I see is that our government is taking that tax money now and running large deficits. What are they going to do in the future when they aren't getting that tax money? Seems like a poorly designed system to me. Starting to get the feeling it could cause the same problem that pensions are causing now in many states.
Thoughts?
So with that backdrop, my discussion point is this:
How will Roth 401ks and IRAs affect tax revenue in the future and how will this affect the deficits? The trend has been for people to put more and more money every year into after tax accounts. Financial advisors are predicting higher tax rates for all in the future in order to fund all of this spending. Thus even though we may be paying 20-30% effective tax rate for the middle class, that could easily be a 30-40% tax rate in a decade or two. And what about in 20-30 years when many of us will actually be retiring. We will have a great tax advantage in the long term by paying the taxes now and getting the money tax free later in life. The problem I see is that our government is taking that tax money now and running large deficits. What are they going to do in the future when they aren't getting that tax money? Seems like a poorly designed system to me. Starting to get the feeling it could cause the same problem that pensions are causing now in many states.
Thoughts?
