Monday, April 5, 2010

The sound of inevitability: Deficits lead to higher tax rates

Interesting chart from comparing the size and timing of deficits in the U.S. and the inevitable result: large changes in tax rates to try to stop the bleeding:

This makes TONS of sense, especially when you combine it with the government's non-stop pushing of tax-deferred accounts for retirement. People will sure feel stupid when they find themselves paying 40-50% tax rates (fed) plus some serious state taxes on 401K and IRA monies they set aside at a time when tax rates were 20-30%.

Don't feel smug if you have your money in Roth IRAs, either. I predict a means-based test for whether or not these withdrawals are truly tax-free. It's not paranoia if they're really out to get you.

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