From: Richard Arsinow <richard.arsinow@rauland.com>
Subject: Tax treatment under Kolbe-Stenholm
Reps. Kolbe and Stenholm, please respond to the following questions and requests for clarification:
The figure of 2% of payroll is quoted as the amount to be diverted to ISAs. Is this 2% taken entirely from the non-tax-deductible employee contribution? Is another 2% taken from the employer contribution, for a total of 4%? Is it 1% from each?
Is the voluntary employee contribution of up to $2000 per year tax deductible?
Under your plan, what will be the income tax treatment of defined Social Security benefits? Will the present taxation, which creates effective marginal tax rates of up to 51.8% for some seniors, be continued? Will that taxation be repealed? Will all benefits be taxed?
What will be the income tax treatment of the proceeds from ISAs?
I'm sure you will agree that the income tax aspects of your plan must factor into the evaluation of its merits versus other plans, yet your summary provides few clues about tax treatment.
