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President Bush`s proposal to eliminate IRA penalties for withdrawals used for education, medical expenses and home purchases is a good one. The idea that wealthy investors are deterred from investing by a 28 percent capital gains tax applies to middle-class investors as well.
Who would put money that might be needed in the near future into an IRA when a withdrawal could be subject to an effective tax of up to 41 percent (31 percent maximum rate plus 10 percent penalty).
Eliminating the penalty is a good start, but equalizing capital gains and IRA withdrawal tax would be even better.
