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...
Control/take your money, control/take your choices, control/take your freedom. Tick, tock, tick, tock. The plan is coming to fruition sooner than many think (if they’re thinking at all) so prepare as best you can.
No aisle-crossing on this, pubbies. I mean you, McLame, your pal Lindsay, the Maine twins, and any of their possible ilk.
This is why I think a Roth IRA is a dumb idea - because by the time you hit 70, they willl change the rules so they can tax you. May as well realize a tax deduction upfront.
Don’t wait. Buy it, learn how to use it, keep it safely secured and hope you never have to use it.
That’s the big pile of money.
Again the government believes that IT
has a is God Given right.
Don’t all spending and tax bills have to originate in the Congress? Don’t the Republicans have charge of the Congress at this time?
Note to congresscritters: keep your sticky paws out of my 401 and out of my mortgage deduction. Stop Spending!
“Roth IRA is a dumb idea”
I more or less agree. Even if they don’t income tax Roth distributions, they could use them to reduce net Social Security income.
If one has a year with particularly low taxable income, partial Rothification worthwhile at a 15% rate though. Providing, of course, that one has sufficient non-retirement assets to pay the tax and won’t need the Rothified money for at least five years.
Good advice for newbies.
It's all about punishing successful people. The left thinks profits are evil. Now the administration is castigating business because they are not investing money in this economy. With Obama declaring that businesses should not make money, what does he expect?
The administration floats trial balloons about nationalizing 401k accounts to help Social Security. What does Obama expect citizens to do when he is threatening their country and way of life?
Obama never intended to 'deliver.' Obama intended to redistribute wealth.
People won't invest, won't hire and won't spend because you don't know what this moron will do next.
There can be no doubt that what Obama seeks is to overthrow the Constitutional Republic that we have enjoyed for the past 230+ years.
Look at what we have become in 28 months.
He must be thrilled.
Countdown until Obama leaves Office: 595 days as of June 4, 2011.
It was worth it to lifelong socialists to sacrifice their carreers, elected office, in order to nationalize health care.
Nationalizing retirement accounts will be a small step if they ever control three branches of government again.
Heck, one more socialist on the Supreme Court and the judiciary will do it for them.
The Ruling Class has put itself in a box. Anything they do causes big problems. If they raise taxes to close the deficit, we go into a much bigger recession than we are in now and tax revenues go down. If they reduce spending, same result plus, they have a harder time buying campaign contributions and workers from power-broker groups like labor unions. If they reduce 401k incentives to close the deficit, they tank the market and start a bigger recession than we already have.
It all goes back to uncontrolled spending and excessive debt over many years.
....conclude that these retirement planning programs will cost the federal government about $600 billion in lost revenue over the next five years.
It’s NOT your money you bloodsucking bast***s!
just do what I do....forget your 401...use the money to pay off your mortgage or bills...
the justification of taxing a Roth is beyond me....one gets no incentive or tax advantage from putting money away except it gains interest, etc...they can’t possibly justify taxing the principle...
I keep thinking they won’t stop with just the 401(k)’s; for real class warfare to break out, they’ll just start taxing overall assets/net worth to “redistribute”. That is, if anybody who has worked hard still has any assets to steal by that point.
That large a pot of money is irresistable to politicians. They will eventually find a way to raid 401k’s. 403b’s might be safe given the population who fall into them tend to be big liberal democrat voters.
conclude that these retirement planning programs will cost the federal government about $600 billion in lost revenue over the next five years
The Republicans in the House have to know it would be the end of most of their careers if they passed such a thing.
While Dems had both houses, yes it was very possible but I can’t imagine enough Republicans would think this was a good idea, not even the RINOs.
Note; As gas has risen to 4 dollars plus/gal. there has been NO mention of the petrolem reserve. Is the gov’t buying hundred dollar oil to put in it? With taxpayer money of course.
More plotting of desperate schemes to postpone doing the one and only thing that will solve the deficit crisis -
STOP UNNECESSARY, UNCONSTITUTIONAL SPENDING
You must switch to an alternative economy and get out from under the material system. Sell it all and move far away from the cities. It’s all coming down and your survival depends on your preparation to survive.
the RATS in Congress will probably EXCLUDE their generous retirement accounts
Another reason to scrap the present tax code and have a national sale tax.
for real class warfare to break out, theyll just start taxing overall assets/net worth to redistribute.....Ever hear of imputed worth? It’s coming.
I take the deferred first to lower my tax bracket. If there is anything left over, it goes into the Roth. However, I am going to put more into deferred this year because Illinois raised the state income tax from 3% to 5%..
Somebody call Ric Edelman!