Skip to comments.Congress takes aim at 401(k)s (to pay for mounting Federal deficit)
Posted on 06/03/2011 9:32:45 PM PDT by rabscuttle385
Should Congress put limits or even completely do away with the tax incentives that make saving within a 401(k) or some other tax-advantaged retirement plan attractive in order to cut the deficit?
The Congressional Joint Committee on Taxation and the Treasury Department's Office of Tax Analysis conclude that these retirement planning programs will cost the federal government about $600 billion in lost revenue over the next five years.
Here's what they suggest instead:
Bipartisan Policy Center Debt Reduction Task Force -- Maintain existing accounts but cap tax-preferred contributions to the lower of $20,000 or 20 percent of income.
National Commission on Fiscal Responsibility and Reform -- Consolidate the various retirement accounts and cap tax-preferred contributions to the lower of $20,000 or 20 percent of income.
The American Society of Pension Professionals & Actuaries, or ASPPA, says the government's math is fuzzy because it doesn't accurately figure deferred revenue -- savers eventually take the money out and pay taxes on it. Based on its calculations, the government would only gain about 25 percent more in taxes and the price would be reduced income and security for people living in retirement.
A separate study by the Stanford University Graduate School of Business says that the introduction of 401(k)s has had an enormous impact on how people invest in stocks and bonds. At the end of World War II, individual citizens owned 90 percent of the stock market; by 2006, they owned only 30 percent. The other 70 percent was held by institutions, including mutual funds, insurance companies and pension funds.
Ilya Strebulaev, associate professor of finance and primary author of the study, recommends that tax reformers consider making the tax rate on capital gains equal to the tax rate on equities held in tax-advantaged accounts. Now, of course, the capital gains rate is 15 percent for most people -- less for low-income people, while the rate son equities in tax-advantaged accounts are the same as for ordinary income. This would level the playing field and potentially make it less attractive to hold stocks in a tax-advantaged accounts. He believes that among other things, holding stocks outside of institutional accounts would encourage individual investors to pay more attention to how their money is invested. "Institutional investors are very passive. They delegate their vote. It's not the best social outcome," Strebulaev says.
Strebulaev dismisses the idea of limiting the tax advantages of retirement accounts to increase revenue. "What I think what our research delivers is that all these small twists in taxation are very unlikely to work."
I have never bought a gun. If they start hacking away at my 401k rights, I just may. I have lost so much freedom already.
Argentina did it.
France has been doing it.
Who has the latest? It was an eastern European country last month.
They will do this, it is just a matter of when, not if....
“....conclude that these retirement planning programs will cost the federal government about $600 billion in lost revenue over the next five years.”
Again the government believes that IT has a God Given right to tax anything and everything as it sees fit. Such ideas must be beaten out of their heads or we will eventually need to abolish the government.
They’ll do it if they are allowed to do so.
They'd have to have been smoking a lot of joints to think that this will fly with middle America.
“...these retirement planning programs will cost the federal government about $600 billion in lost revenue over the next five years.”
Bulls#it. This is not “lost revenue”. They were never going to get it, so they can’t “lose” it. If the author were being honest, this phrase would read “...these retirement planning programs represent an additional $600 billion revenue potential for the government over the next five years.” But they can never write that, because it exposes the government for the parasite it really is.
They want to crash the stock market too. Because the employment scene and housing market are not enough.
CONgre$$ and the WH are a clear danger to this country and its financial future.
They just can’t kick their addiction for OPM.
I doubt they “cost” the government anything. First of all they tax too much and are stealing our money as it is. Secondly, by allowing people to invest more of their own money these people become less dependent upon government handouts which should be a good thing for government.
Or, to paraphrase John Bigboote (that’s Bigboo-TAY!), “It’s not your goddamn money, understand, monkey boy?”
Why are socialist so fixated on five year plans?
What the ass hats are forgetting is that money is INVESTED IN THE ECONOMY. Not to mention the municipal, state, and FEDERAL bonds that are bought with some of this money.
The money that poured into the markets beginning in the early 80's was the primary driver of the phenomenal growth and advancement in the last three decades.
I'm fully confident that this Congress won't do it, but if Dems get the House again, you'd better believe they would.
What an individual saves for his or her retirement or for things they want to do to keep themselves out of debt is not the government’s money it is our hard earned funds. The idea that this effing government thinks that everything we make belongs to them and we are entitled to just a stipend thanks to their benevolence is an outrage. When in hell are people in this nation going to wake up and scream ENOUGH?
Love that movie.
Of course they should. But only as part of a constitutional amendment outlawing income taxation at all levels of government federal, state, local, and international (enforced by nuclear weapons financed with a consumption tax).
“Why are socialist so fixated on five year plans?”
...because they worked so well in the USSR, that’s why...