Here are two links to outline the real and potential tax increases in 2013.
Increasing the debt limit does not solve the debt crisis, it exacerbates it. Next year this time the US debt will be north of $16 trillion and we will be wondering what happened to that debt reduction plan.
from Rubin Sanchez;
Now we know the fate of building 60, other wise known as the back plant. It’s being torn down as we speak. I drove down there and took a photo. Attached is that photo. The East wall is gone and you can see the back of the coaters and ovens. To the left is what’s left of the wet end warehouse. There is nothing but ruble. You can’t get too close as they have a security guard. You are not supposed to get closer than the wall of Solvent Recovery next to the parking lot. I guess he didn’t see me soon enough as I got a little closer to take this photo. I will try to take more photos as the demolition continues. The security guard said it should take up till August.
Here is the rate increase table for MN gasoline taxes for vehicles;
|Date||Increase ($)||Total ($)||Pct Increase (%)|
The federal gasoline tax is $0.184 per gallon.
For the average driver getting 25 mpg and driving 12,000 miles per year they would pay about $74 in federal tax and in 2011 (before 7/1/11) about $112 in MN gasoline taxes.
Retirees are often lured into a Roth IRA. The idea of not paying an income tax on withdrawals is almost irresistible. I had the same thought my self so I decided to examine the pros and cons of an Roth IRA vs a Conventional IRA.
What I determined was not exactly what I expected. I put together a spread sheet using the examples of a Roth IRA initially taxed at both 15 percent and 25 percent. And the same amount invested into a conventional IRA at the same tax rates.
The problem with a Roth IRA is that the initial tax must be paid either from your income, or from another IRA sets you back by the amount of the tax. Given the same investments and term of the investment, the one with the lesser initial value will be forever behind the one that grew without taxes withdrawn. That can be seen clearly in the table below. If the initial tax bracket is higher than the withdrawal tax bracket of a conventional IRA the difference is even greater.
One the positive side, one never knows what a future Congress will do to the tax brackets. With the Roth IRA you know the rate of taxation from the time you make the initial withdrawal or conversion. You cann’t make the same statement on what the tax brackets will be 10 or 20 years from now. History has shown that the lower brackets tend to expand upward with inflation, that is they are indexed. But if a financial crisis were to occur all bets are off as to what the tax brackets might be some years from now.
If your current marginal tax bracket is 25 percent that $1000 becomes $750 to invest, and in 10 years at 7 percent growth you will net $1475. A conventional IRA will accumulate $1967 of the same period, but taxes on withdrawal (assuming a 15 percent rate) will be $295, netting $1672 or $197 more than the Roth IRA. While higher total taxes are paid on the Conventional IRA, the net is likely to be higher than with a Roth IRA.
Longer investment periods or rates of growth will have no effect on the outcome, assuming that both types of IRA are invested in the same investments.
|Comparing a Roth IRA to Conventional IRA|
|Description||Roth IRA 15||IRA 15||Roth IRA 25||IRA 25|
|Tax Rate on Invested Amount||15.00%||0.00%||25.00%||0.00%|
|Assumed Growth Rate||7.00%||7.00%||7.00%||7.00%|
|Years to maturity||10||10||10||10|
|Proceeds before Tax||$1,672.08||$1,967.15||$1,475.36||$1,967.15|
|Tax Rate on Proceeds||0.00%||15.00%||0.00%||25.00%|
|Tax on Proceeds||$0.00||$295.07||$0.00||$491.79|
|Total Taxes Paid||$150.00||$295.07||$250.00||$491.79|
|Equivalent Tax rate||8.97%||15.00%||16.94%||25.00%|
|I was comparing a Roth IRA to a Conventional IRA, and was surprised that maybe a conventional is better in some ways.|
A Roth IRA does have some advantages over a conventional IRA however. They are not subject to the MRD – Minimum Required Distribution that an IRA starting at age 70½, and there are no penalties for early withdrawal. My plan when I hit the MRD age is to take the MRD, and roll the excess amount into a Roth at the end of each year.
For more information on a Roth IRA see here.