Congress probably won’t produce a broad overhaul of the U.S. tax code anytime soon. But if and when it does, lawmakers shouldn’t overlook some of the oddities of the way we tax retirement income. Many Americans are stressed out about their economic security in old age, and tax code writers could ease their pain.
My Reuters Money column today features an interview with Richard Kaplan, a professor at the University of Illinois College of Law who has researched and written on the subject of reforming taxation of retirement income. He talks about three areas ripe for reform – the required age for minimum distributions from tax-sheltered accounts; why we should differentiate between ordinary income and long-term capital rates on 401(k) and IRA withdrawals; and simplification of Social Security taxation.