From: Richard Arsinow <richard.arsinow@rauland.com>
Subject: RE: Cong. Sanford's Response
Thank you for your responses, Rep. Sanford. I have just a few followup questions, after reading your answers:
*The additional after-tax contributions and their earnings, like Roth IRAs, are completely tax-free at withdrawal. But aren't you adding a new income tax on lower-income recipients and taxing the employee FICA portion twice? As under current law, employee FICA is not deductible. Under current law, Social Security benefits are 50% taxable when provisional income rises above a certain threshold, and 85% taxable once a second threshold is passed. For low-income recipients, though, they are not taxable. Proceeds from the PRAs would replace a portion of Social Security benefits. Shouldn't they receive the same tax treatment as the Social Security benefits they replace? At least, the principal amounts obtained from after-tax FICA should not be taxed again.
*My question about inheritability referred not to PRAs but to Social Security benefits. I assume that the present value of the future benefit stream could be calculated at the time of death, in the same way that a value is calculated at normal retirement under your plan.
*Are you saying that if your plan is adopted it will not be necessary to dip into the trust fund in 2014 or 2015, or ever, to help fund boomers' retirement benefits?
