How would the new option compare to a plan with the given

Assignment Help Management Theories

Reference no: EM131457359

Question: Suppose taxpayers were given a new option under the tax law for retirement funding. The new option requires that they forego a current tax deduction for pension plan contributions. Any contribution would accumulate in the pension fund free of tax, and distributionsfrom the plan to beneficiaries would also be tax free.

The usual rules provide for current tax deductibility of pension plan contributions and full taxation of pension plan distributions at ordinary tax rates. The tax rates at which contributions reduce taxes and the tax rates at which distributions increase taxes may differ because they occur at different points in time

a. Who would prefer the new option?

b. What would likely happen to taxes collected by the government in the short run? In the long run?

c. What would likely happen to the aggregate amount ofsavings undertaken through pension accounts?

d. How would the new option compare to one in which pension plan contributions give rise to current tax deductions and pension plan distributions are taxed at the same rate at which deductions were taken?

e. How would the new option compare to a plan with the following?

• Pension plan contributions give rise to current tax deductions.

• Pension plan distributions are taxed at the ordinary tax rates that apply at the time the distributions are made.

• Distributions are taxed at a rate above (below) the rate at which contributions are deductible and taxpayers receive a tax credit or pay additional tax equal to the difference in tax rates multiplied by the pension plan contributions.

Reference no: EM131457359

Questions Cloud

What assumption a carry trader would expect profit : Based on what assumption a carry trader would expect profit? Is there risk in the carry trade? Among these currencies, why some are considered unconventional

Which alternative-the sweetened pension benefit : An employer wishes to provide health care benefits to its workers when they retire. The firm faces a current marginal tax rate of 35% and expects to face.

What do you think of the idea : What do you think of the idea that the most important question of all to ask is "What is the mission"?

Determine the cause of the issue : From the e-Activities, discuss the current event you reviewed from the selected federal, state, or local agency and determine the cause of the issue.

How would the new option compare to a plan with the given : Suppose taxpayers were given a new option under the tax law for retirement funding. The new option requires that they forego a current tax deduction.

What are the biggest drawbacks to using qualitative methods : What are the most effective strategies for managing quality control on qualitative methods in program evaluation? Why are they the most effective?

Unauthorized access to us government networks : Is it acceptable for other countries to attempt to gain unauthorized access to US government networks? Why or why not?

Write a report comparing the sales volumes : Write a 700-word report comparing the sales volumes and the consistency of sales of these four salespersons - You are employed as a statistician for a company that makes household products. which are sold by part-time salespersons who work during..

Explain how advocacy has contributed to the policy change : Explain how advocacy has contributed to this policy change. Discuss how your agency will submit the proposed policy for input from beneficiaries.

User Account

All Pages