This week, we’re highlighting tax law changes from President Obama’s proposed budget. Will it pass as written? Almost certainly it will not. There will be changes and compromises as it gets hammered through the House and Senate. But it’s good insight to see what is being talked about and what we may see eventually.
One of the perennial favorite ‘tax the other guy’ topics is to find a way to tax the rich, provided the rich is not you.
In this case, as a direct reaction to the revelation that Mitt Romney has stashed away enough cash in an IRA to purchase an island hideaway, the President has proposed a limit the balance in a taxpayer’s tax-deferred retirement account. The limitation would be for an amount sufficient to finance an annuity of not more than $205,000 per year in retirement. That means it would be approximately $3,000,000 for someone retiring in 2013.
The limitation appears to be just on tax-deferred pensions, leaving Roth pensions alone. For employees, though, they may find that if their bosses don’t get to contribute to their pensions, they’ll just stop pension plans altogether. The trickle down on this particular provision could be costly to employees.