I know that's a bold claim, but even I haven't heard of this one until a couple of weeks ago. Once I heard it, I had to go find an article supporting it so I could have clarity. There is an IRA surtax on large withdrawals!
Here is the article talking about Congress WAIVING that surtax on large IRA withdrawals back in 1997:
What is it?
Per the article: "Since 1987, taxpayers who withdraw more than the allowable limits, $160,000 for 1997, would pay a 15 percent excise tax on the dollars over the limit in addition to regular income tax on those dollars."
Why do this? Is answered in the next paragraph: "When the excise taxes were enacted, Congress was concerned by the large IRA balances building up. The government was seeing IRA balances of $3 million to $5 million, and Uncle Sam's mouth started watering."
Reminds me of this quote by Ronald Reagan:
"If it moves, tax it. If it keeps moving, regulate it. If it stops moving, subsidize it."
(Ironic that these excise taxes were put in place during his presidency and waived under Clinton.)
The reason nobody is talking about this, is that it isn't being done today... but it's still in the tax code, just not being enforced.
Since this isn't current practice, I don't know what the limits for the IRA excise tax would be today in 2021... but those dollar amounts certainly look eerily similar to Medicare IRMAA (Income Related Monthly Adjustment Amounts) limits to charge more for your Medicare premiums simply because you have more IRS recognized income.
One advisor's perspective in the article: "People who will benefit from the change don't really need it, he said. In Moneysmith's opinion, if you need more than $160,000 a year to live on and you can withdraw it from your IRA, you can afford a little excise tax."
I believe that YOU have the fundamental right to be the primary beneficiary of your life's work and of your financial and retirement planning. And just because YOU were more successful in building up your retirement plan balances... does NOT mean that the Government should be PENALIZING you for that success!!!
By the way, on a side note, I wonder how this excise tax would work if you had RENTAL PROPERTY inside your IRA as an investment? You can do that. People do that. They use a kind of self-directed IRA to purchase property. But if your rental property IRA enterprise is generating large cash flows... I wonder if that cash flow would be subject to this excise tax? (I don't know the answer, but it would be interesting to learn.)