Broken Promises

I always receive a lot of flack when I dare show any skepticism regarding the government's veracity when it comes to honoring its promises.  This attitude isn't based on any kind of hatred for the government; but rather an honest assessment of the past record.  Our rulers have no qualms whatsoever about breaking promises.  I am referring mainly to tax issues here; but there is no shortage of about-faces by our rulers.

When Social Security was first established, the promise was that the benefits would always be completely tax free.  What we have now is quite different, with 85% of the benefits subject to income tax for many of our seasoned citizens.

A few years ago, I was one of the lone voices warning against a popular move to convert ordinary IRA accounts into Roth IRAs.  This required people to pay real taxes based on the promise of tax free benefits several years down the road.  My concern then, as it still is now, is that by the time those people start withdrawing from their Roth IRAs, our rulers will establish a means test along the same vein as with Social Security recipients, requiring them to pay taxes on the Roth IRA pay-outs. 

States also break tax promises.  As shown in this article about the Section 529 college savings plans, many states that promised to waive income taxes on the accounts for people who go out of state are going back on their word and starting to tax them.

It just shows that tax planning is a never ending process, with constantly changing rules and moving targets.

KMK

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 5/07/2003 11:03:00 PM Send this post: