Malcolm Cutchins: Long-term policies need stability

It is extremely important for long-term federal government policies to be stable. Citizens and businesses that actually earn the money and plan ahead should be protected from the whims of a political party or a charismatic leader.
Primary among such policies are those relating to defense. If we fail at the defense of our country, the other things won’t matter. Right there with defense ranks stability of the currency. Neither political party has done well lately with the latter!

Citizens need to have the confidence that the financial road ahead does not have too many sharp curves, potholes, difficult-to-navigate hills and especially drop-off cliffs. Unfortunately, we have experienced a lot of these in 2008, primarily due to wrong-headed loan policies that triggered widespread loss of confidence.

Even before the inauguration of the President-Elect next Tuesday, he and our spendthrift Congress have added “Print and Spend” to the usual, “Tax and Spend” label. Using the printing press to come up with money it does not have is just another form of stealing, not only from the present citizens but also from future generations. The latter will lose both due to future higher tax rates and due to inflation, a real double whammy.

As just one example of policy, many readers (especially younger ones just getting started with IRA’s) probably do not know that the government even dictates the annual amount citizens over a certain age have to take out of their own IRAs (if they have any with funds in them). It’s called Required Minimum Distribution (RMD). Taxes do have to be withheld and paid on these required distributions. This past year the monthly government-dictated RMDs have been taken out of ever decreasing funds since the amount was determined on the last day of 2007 and not changed at all during the year.

At least for 2009, I understand that the RMD requirement has been waived due to the large losses of 2008. Citizens wise enough to change funds in prior years from traditional IRAs to ROTH IRAs are exempt from the RMDs on the changed-over funds since taxes have to be paid in the tax year of the changes. (Of course, it now may prove to have been unwise to pay taxes on funds that have greatly decreased in value.)

As a second policy example, the resurgence of the federal government’s insatiable desire to take more taxes from its citizens and businesses has raised its ugly head once again. Congress, like a racing rabbit chasing a carrot, is coveting death taxes (estate taxes) once again. I’ve always felt strongly that anyone’s death should not be a taxable event. Why should the federal government have the authority to tax funds at much higher rates, funds that have been saved or built up in a business over many years, at the critical time of death of a family member? It’s insane. It’s greed to the most shameful degree. Democrats and Republicans alike need to resist this tooth and nail.

Dr. Malcolm Cutchins is an emeritus professor of engineering of Auburn University and writes a weekly column for the Opelika-Auburn News.