Booes, Hisses and Cheers
Tax-Free Savings! Is That Good?

The Bush administration has begun touting tax free savings accounts.

The first budget proposal would create two new consolidated savings accounts: Lifetime Savings Accounts (LSAs) and Retirement Savings Accounts (RSAs). Not only would individuals be able to contribute up to $7,500 a year to these accounts regardless of their income or age, but the proposal also includes a provision that would allow individuals to transfer existing accounts into these new accounts. There would be no restrictions on the money's withdrawal.

I'm very suspicious of these tax free savings accounts. According to the article, it would mainly benefit the wealthy, which makes sense since the rich haver more investments than the middle class. It seems like the Republicans don't think that investments ought to be taxed at all, its really kind of disgusting. I suppose their reasoning is that "since the well-off investors work, they shouldn't pay taxes".

However, not the plan isn't all bad:

The second budget proposal would create Employer Retirement Savings Accounts (ERSAs, not to be confused with ERISA, the Employee Retirement Income Security Act). These accounts would consolidate 401(k), simple 401(k), 403(b) and 457 plans into a single type of plan. ERSAs would follow a simplified set of rules similar to those for 401(k) plans.

Simplyfing the tax code is almost always good and according to the article, these ERSAs will be more fair to the poor and make tax sheltering more difficult. Let's just home the tax free accounts are amputated to protect the good that ERSAs might do, but of course something so reasonable would never happen. I suspecte that they are just a beard designed to cover the nastier features of this proposal. Blast!