Spring 2026
— William H. Darling, CPA, Chairman & CEO
—Jeanne M. FitzGerald, CPA, Tax Manager & Vice President
A recent article on the use of disclaimers caught our attention.[1] The tightened rules for inherited IRAs make disclaimers a potentially useful tool. “A disclaimer is a legal document in which someone renounces an asset that was set to be inherited.”[2] As the article points out some “retirees and pre-retirees have traditional IRAs far larger than they expected.” The tightened rules require the inheritor to recognize ordinary income from the IRA over ten years. If the IRA not only lists a primary beneficiary but also contingent or secondary beneficiaries, then a disclaimer may prove useful for family tax planning by moving family income to members with lower tax rates.
Betting Against DOGE
Last year’s efforts by the “Department of Government Efficiency” (DOGE) were good for media commentary and probably generated some useful ideas. They also generated a bet in the predication markets against the department’s success and for government spending to go up.[3] The description of the federal government and the reason DOGE would fail are what caught our attention. “The US government has been described as an insurance company with an army. Now, with federal debt nearing 100% of gross domestic product, it’s an insurance company with an army and a giant mortgage.”
By concentrating on Social Security and Medicare benefits and not on the potential cuts in government contracts or to the total federal workforce, the winning bettor’s outlook was this: “It’s almost like the government has 19 elderly ‘employees’ for every actual employee.” He won. Government spending went up.
The Effects of Wealth Taxes
Wealth taxes are in the news again. As we commented in our Fall 2019 QMP, “the Scandinavian experience in creating wealth taxes, mostly in the 1970s, makes it worthwhile noting that Sweden, Denmark and Finland abandoned the wealth tax in 2007 or earlier because the ‘the tax which was designed to keep the rich from getting richer, is increasingly seen as harming the not-quite-rich upper middle class’” (Our reference then was to WSJ 9/26/2019). In our Winter 2021 QMP, we commented that there is a US Constitution problem with proposed state wealth taxes reaching across state lines. Comments this year are: “As millionaire taxes (wealth taxes) fail to deliver promised collections because of implementation issues and the fact that millionaires tend to be very mobile, the tax base will inevitably expand and hit a broader swath of the middle class.”[4]
High state income tax rates, let alone wealth taxes, have taxpayers voting with their feet. Data from the IRS for the period 2012-2023 “quantify the massive wealth transfer from high tax to low tax states due to interstate migration.”[5] Florida gained $1 trillion in income, not counting assets moved, during the period, and California and New York lost $500 billion and $400 billion, respectively.[6] The effects aren’t hidden. As unlikely as it might seem, this may be the death throes of a very bad idea.
If you or any other advisors have questions about the issues raised here, please contact your investment manager or one of us.