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A Tax on Retirement Accounts?

A new tax reform proposal has surfaced that would impose a 15% tax on retirement accounts.

More specifically, the proposal includes a new 15% tax on interest paid to tax-exempt institutions and retirement plans.

The corporate tax reform plan, by Alan Viard of the American Enterprise Institute and Eric Toder of the Urban Institute, calls for a cut in the top corporate rate from 35% to 15%. To offset this drop in corporate rates (keeping the proposal revenue-neutral), the proposal also includes (among other things) a new 15% tax on interest earned by retirement plans “to limit the net tax benefit these taxpayers receive from a lower corporate tax rate,” according to the proposal’s authors. They claim that this would raise $48 billion in 2018 and $60 billion in 2025.

Under the proposal, shareholders in public companies would pay the same rate on dividends and capital gains as they pay on their ordinary income. The proposal would also impose an annual tax on any increase in stock holdings, rather than waiting until the stocks were actually sold.

Will this proposal gain any traction? It’s hard to say, but it’s already drawn the attention (and support) of the Washington Post’s editorial board.