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Author: cindi Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76082  
Subject: Roth IRA and a consumption tax Date: 6/2/1998 9:02 PM
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I have been a little bummed because we do not qualify for converting our IRA's into Roth IRA's. However an article I read recently got me thinking. If the USA switches to a consumption tax in future years, converting to a Roth would have been a costly move. Any thoughts on this?
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Author: Tiggertoo One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3554 of 76082
Subject: Re: Roth IRA and a consumption tax Date: 6/2/1998 10:39 PM
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>>>I have been a little bummed because we do not qualify for converting our
IRA's into Roth IRA's. However an article I read recently got me
thinking. If the USA switches to a consumption tax in future years,
converting to a Roth would have been a costly move. Any thoughts on
this?<<<

IMHO you don't have anything to fret. I do not think it will happen anytime in the near future. This subject has been around for a long time and has never moved any closer to actuality.

If it does happen, I am sure there will be some provision for the tax deferred accounts. If not, there would be a mass lynching of our elected senators and representatives.

The taxs laws are so ingrained in our society and governmental policy that I don't think that they could change them even if they wanted to. How else do you think that the government can change policy so easy as with tax laws.

Think we are having to many people in this country, try cutting the deduction. Want to enlarge the workforce, try giving a tax credit for child care.

Roth on, Roth forever!

LOL

TTFN...TiggerToo

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Author: cindi Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3555 of 76082
Subject: Re: Roth IRA and a consumption tax Date: 6/2/1998 11:48 PM
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"If it does happen, I am sure there will be some provision for the tax deferred accounts. If not, there would be a mass lynching of our elected senators and representatives."

TiggerToo,

Thanks. You are probably right. Although I remember hearing them banter around taking away our interest deductions on home purchases, just like they did for consumer loans a few years ago. I do think the Roth is a great way to encourage people to support themselves in retirement.

Cindi

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Author: SnootFool Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3556 of 76082
Subject: Re: Roth IRA and a consumption tax Date: 6/3/1998 12:20 AM
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Tiggerto:
<If it does happen, I am sure there will be some provision for the tax deferred accounts. If not, there
would be a mass lynching of our elected senators and representatives.>

Cindi:
<Thanks. You are probably right.>

Me:
You actually think your Uncle, in 2025 or whatever, would *refund* a portion of the taxes which you paid the IRS thirty years ago??? Have I got some prime real estate in Florida for you guys!! Or would you prefer the Brooklyn Bridge? ROFL! ;-)

Having said that, I don't think that a consumption tax is likely to replace the income tax simply because it would screw the poor & middle class and have the appearance of letting the country club set off the hook since progressivity would be gone. Not gonna happen. I'm putting my $$ where my (smart) mouth is, since I've converted my IRAs to a Roth already. We'll see who's right in 30 years or so.

Chris


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Author: markr33 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3557 of 76082
Subject: Re: Roth IRA and a consumption tax Date: 6/3/1998 12:57 AM
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>>>I have been a little bummed because we do not qualify for converting our
IRA's into Roth IRA's. However an article I read recently got me
thinking. If the USA switches to a consumption tax in future years,
converting to a Roth would have been a costly move. Any thoughts on
this?<<<

<< IMHO you don't have anything to fret. I do not think it will happen anytime in the near future. This subject
has been around for a long time and has never moved any closer to actuality.

If it does happen, I am sure there will be some provision for the tax deferred accounts. If not, there would
be a mass lynching of our elected senators and representatives.>>

If our tax system changes and becomes based on a
consumption tax, people with tax-deferred accounts
would THANK their elected representatives !!!

I also doubt that tax law will change so drastically,
but who knows what can happen over 30-40 years.

A Roth conversion could also be a costly move if
you expect much lower tax rates in the future.

Mark


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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3558 of 76082
Subject: Re: Roth IRA and a consumption tax Date: 6/3/1998 7:03 AM
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Cindi said:

<< If the USA switches to a consumption tax in future years, converting to a Roth would have been a costly move. Any thoughts on this?>>

Tiggertoo commented:

<<IMHO you don't have anything to fret. I do not think it will happen anytime in the near future. This subject has been around for a long time and has never moved any closer to actuality.

If it does happen, I am sure there will be some provision for the tax deferred accounts. If not, there would be a mass lynching of our elected senators and representatives.>>

Pixy adds:

While I agree with Tigger re the grandfathering of DIRECT taxation and on the liklihood of a consumption tax passing in the near term, I never would put anything past a Congress hungry for tax dollars. IF -- and it's a big one -- Congress decides to pass some kind of national sales tax or value added tax, there is no way a Roth can be grandfathered to escape that kind of taxation. You buy something, you pay the tax regardless of the source of the funding for that purchase.

kRegards....Pixy

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Author: Tiggertoo One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3566 of 76082
Subject: Re: Roth IRA and a consumption tax Date: 6/3/1998 10:54 PM
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>>>If our tax system changes and becomes based on a
consumption tax, people with tax-deferred accounts
would THANK their elected representatives !!!<<<

Mark, this is not intended to be critical, but I would appreciate knowing your logic for this statement?

TiggerToo

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Author: SnootFool Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3573 of 76082
Subject: Re: Roth IRA and a consumption tax Date: 6/4/1998 12:42 PM
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Tiggertoo:
>If our tax system changes and becomes based on a
consumption tax, people with tax-deferred accounts
would THANK their elected representatives !!!<<<

TiggerToo:
<Mark, this is not intended to be critical, but I would appreciate knowing your logic for this statement?>

Me:
Not trying to put words in Mark's mouth, but I think he means that somebody who invests in a Traditional IRA & expects to pay perhaps 28% income tax on those returns would be pretty psyched to find out that the tax rate is dropping to 15-18% due to a flat income tax, VAT, whatever. The folks screaming bloody murder would be the Roth investors who have already paid their 28%!

Chris



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Author: markr33 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3836 of 76082
Subject: Re: Roth IRA and a consumption tax Date: 6/17/1998 11:34 AM
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>>>If our tax system changes and becomes based on a
consumption tax, people with tax-deferred accounts
would THANK their elected representatives !!!<<<

<< Mark, this is not intended to be critical, but I would appreciate knowing your logic for this statement?>>

Well, if you have tax deferred accounts such as a 401(k) in which INCOME taxes are paid when you withdraw the money, if the income tax has been replaced by a consumption tax, then you would only pay tax on what you spent (and was consumption taxable), not necessarily on what you withdraw !!

Mark


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Author: markr33 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3837 of 76082
Subject: Re: Roth IRA and a consumption tax Date: 6/17/1998 11:36 AM
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<<Me:
Not trying to put words in Mark's mouth, but I think he means that somebody who invests in a Traditional
IRA & expects to pay perhaps 28% income tax on those returns would be pretty psyched to find out that
the tax rate is dropping to 15-18% due to a flat income tax, VAT, whatever. The folks screaming bloody
murder would be the Roth investors who have already paid their 28%!>>

Exactly.

Mark


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