I just read an article from Fox News on Bush’s new proposed tax-advantaged savings accounts (see http://www.foxnews.com/story/0,2933,110695,00.html). It covers Retirement Savings Accounts (RSAs), Lifetime Savings Accounts (LSAs), and Individual Development Accounts (LDAs). It does not mention Health Savings Accounts, which have exceptional tax-benefits (no taxes) for medical purposes.
I support all of these accounts except for Individual Retirement Accounts. All of the other accounts provide loopholes, which allow us to avoid some taxation. So, too, does an IDA, but it also mandates more taxation and/or inflation. Here’s how an Individual Development Account works.
If you have an adjusted growss income of $20,000 or less, you can contribute $500 to the IDA. The government-approved agency or financial institution sponsoring the IDA then matches your contribution of $500, giving you $500. That agency is then reimbursed by the government. So, what does that mean? Basically, more taxes, more inflation. It’s welfare for the lower-middle class disguised as a savings plan and tax loophole.
I must say, my first reaction to this was positive. After my $13k contribution to my 403(b), I’m eligible for that. However, to participate in such an account amounts to nothing more than stealing from those who are the net tax-payers in that situation. This aggregious immoral aspect could be fixed, however, if the proposed legislation would be changed slightly. If you change the legislation so that institutions matching IDA contributions get a dollar-for-dollar tax reduction (e.g., their taxes, not their taxable income, are reduced by $500). This does not mandate thievery and robbery.