I wish I could take credit for the idea of worst tax ideas of 2009, but that credit actually has to go to Howard Gleckman from the Tax Policy Center. He came up with the top 10 worst ideas.
My favorite for these Lump of Coal awards:
( 10 ) The Roth Rollover. I think it’s a great idea for many high wealth tax payers that starting in 2010, they can roll over as much of their tax-deferred pensions into tax-free Roth accounts. They have two years to pay the tax for making the roll (at the current fair market value of the pensions, likely down from what they used to be) and from here on out they’ll get to make money tax-free on the account.
I’ve got clients who are taking full advantage of this and then using their tax free funds to make money big-time in this down real estate market.
Oh, and remember, a pension plan is probably your best asset protection device yet.
So, why is this a bad idea? It’s a bad idea for the government. They are going to come out as winners when they carve away at the huge deficit due to their magical policies. Or at least, that’s what you’ll hear on the news. In reality, they’ve just borrowed against the future and let people pay a fraction of the tax that they would have otherwise had to pay.
( 7 ) Taxing the Rich. But I’ve got a different reason than Mr. Gleckman has for nominating this tax idea by the government. I think it’s a bad idea because ‘the rich’ is too nebulous. It’s a moving target that seems to keep shifting downward. Pretty soon anyone with a job will be considered ‘rich.’ That’s when you need to look out!
( 4 ) California. California is the 5th largest economy in the world and can’t balance its budget. This is very scary.
( 3 ) Homebuyer credit. I predict that in the next few years we’re going to hear about the widespread tax credit abuse here. It’s estimated that as many as 74,000 first time homebuyers who got the credit, never bought a house!
So what are your favorite bad tax ideas? Here’s the link to Howard Gleckman’s top 10. http://taxvox.taxpolicycenter.org/blog/_archives/2009/12/24/4410734.html