President Joe Biden’s proposed 2025 federal budget would limit taxpayers’ ability to accumulate excessive retirement account balances.
It would require that taxpayers with at least $10 million in tax-preferred retirement accounts withdraw half the difference between their actual account balance and $10 million each year. For example, a taxpayer with a $12 million retirement account balance in 2025 would be required to take a $1 million withdrawal. If the balance in 2026 reached $11.5 million, a $750,000 withdrawal would be required that year, and so on.
Taxpayers with retirement account balances of at least $20 million would be required to take a distribution to bring the account balance to $20 million or less. The new withdrawal rules would apply only to taxpayers with earnings of at least $400,000 for the year, $450,000 for married couples.
We asked two professors and authors of ALM’s Tax Facts with opposing political viewpoints to share their opinions about Biden’s proposal to limit the value of retirement accounts for high-income taxpayers.
Below is a summary of the debate that ensued between the two professors.
Their Votes:
Their Reasons:
Bloink: For far too long, the wealthiest taxpayers have been able to use their retirement plans as estate planning tools. We’re talking about Americans with extreme accumulations in retirement accounts, to the tune of at least $10 million. Biden’s proposal serves to limit these accounts to their intended purposes and limit the ability of the wealthiest taxpayers to use their tax-preferred retirement accounts as wealth transfer vehicles.