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Are Democrats Eyeing 401(k)s, IRAs for Tax Hit?
IBD Editorials ^ | October 12, 2011 | JOHN MERLINE

Posted on 10/12/2011 4:26:54 PM PDT by Kaslin

s your 401(k) safe from the tax man? That's a question that might be worth asking, as the congressional "supercommittee" scrambles to find $1.5 trillion in additional deficit cuts.

In September, the Senate Finance Committee held a little-noticed hearing that explored changes to retirement plans — principally employer-sponsored 401(k)s — that would in one way or another cut their tax deductions.

The tax breaks' size makes them a tempting target for lawmakers. According to the White House budget office, tax exemptions for 401(k)s and IRAs will "cost" the government more than $436 billion over the next five years.

Senate Finance Committee Chairman Max Baucus, D-Mont., complained that "in spite of the tremendous tax preferences," Americans aren't saving nearly enough for retirement.

Critics say the existing system benefits mostly the rich. The liberal-leaning Tax Policy Center calculates that 80% of these tax "expenditures" go to the top 20% of earners. Such people "would almost certainly save for retirement even without tax incentives," said Karen Friedman, policy director at the Pension Rights Center.

But Judy Miller of the American Society of Pension Professionals and Actuaries argues that the deduction's cost is wildly exaggerated. Adjust for the taxes paid when retirees withdraw money and the cost is cut in half.

And, she says, the break is more progressive than some allege. Among other things, high earners who get a bigger tax break going in end up paying more in taxes when they take the money out.

(Excerpt) Read more at investors.com ...


TOPICS: Business/Economy; Editorial; Front Page News; Government
KEYWORDS: 401k; rat; socialism
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1 posted on 10/12/2011 4:26:59 PM PDT by Kaslin
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To: blam; Nachum; TigerLikesRooster

Ping


2 posted on 10/12/2011 4:29:41 PM PDT by Jet Jaguar
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To: Kaslin

Since Cain’s 9-9-9 plan does not preserve the deduction for 401Ks then this may be an issue regardless of who wins in 2012/


3 posted on 10/12/2011 4:29:52 PM PDT by SoJoCo
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To: Kaslin

http://www.pensionrights.org/

check out this bunch of white wine marxists and their union-backed links

they aim to do the exact opposite of their organization name - tax retirement accounts in the name of “equity”. This is the unions looking for loose change in the sofa cushions to pad their own benefit programs. Insatiable.


4 posted on 10/12/2011 4:32:54 PM PDT by silverleaf (Common sense is not so common - Voltaire)
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To: Kaslin
“We’ve got to educate the American people at the same time we educate the President of the United States. The Republicans, Speaker Boehner or Majority Leader Cantor did not call for Social Security cuts in the budget deal. The President of the United States called for that,

-John Conyers July 27th 2011

Conyers on Jobs: “We’ve Had It.” Lays Out Obama, Calls for Protest at White House
5 posted on 10/12/2011 4:33:21 PM PDT by cripplecreek (ALCS/NLCS playoff thread http://www.freerepublic.com/focus/f-chat/2789907/posts)
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To: Kaslin

Even THREATEN to tax my 401(k) and I will abandon the program, take the tax hit, and find another private avenue of accumulating wealth for retirement.

And I won’t be alone. By the time the democrats get there, there will be George Bailey’s $1 in the lock box and nothing more.

I don’t cotton much to bait and switch.


6 posted on 10/12/2011 4:34:08 PM PDT by freedumb2003 (Herman Cain 2012 -- the man we need at the time we need him)
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To: Kaslin

That, and probably just about anything else that isn’t nailed down.


7 posted on 10/12/2011 4:34:44 PM PDT by yup2394871293
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To: Kaslin
Are Democrats Eyeing 401(k)s, IRAs for Tax Hit?

You bet your @$$ they are.

8 posted on 10/12/2011 4:34:53 PM PDT by Lazlo in PA (Now living in a newly minted Red State.)
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To: Kaslin

There going to take away the last refuge for middle income earners. For those that are living off their investments, this is like changing the rules after putting your ante in the pot. Time to pull it all out, renounce the citizenship and live abroad.


9 posted on 10/12/2011 4:34:53 PM PDT by BipolarBob (Never play poker with the plumber at Buckingham Palace. He's got a Royal Flush.)
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To: Kaslin
Too late.

Took the money, paid the tax.

Anyone with eyes and ears knew this was coming.

10 posted on 10/12/2011 4:35:30 PM PDT by Jim Noble (To live peacefully with credit-based consumption and fiat money, men would have to be angels.)
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To: Jim Noble
Anyone with eyes and ears knew this was coming.

Correct. The St. Louis Fed published a scholarly article on this in 2004.

11 posted on 10/12/2011 4:36:47 PM PDT by Publius
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To: Kaslin

Isn’t the response to the headline question “do bears s**t in the woods”? Obama’s Peronista government is already looking to Argentina for inspiration.


12 posted on 10/12/2011 4:39:33 PM PDT by rockvillem
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To: Kaslin

Of course


13 posted on 10/12/2011 4:39:49 PM PDT by Skepolitic
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To: Kaslin

I have been particularly concerned with this after I realized that Obama has merged all the big investment companies with the big banks, like Wachovia with Wells Fargo and Merrill Lynch with B of A.

I don’t like having all our money in one institution and I don’t like the government intrusion into those banks.


14 posted on 10/12/2011 4:40:00 PM PDT by Eva
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To: Kaslin

They would have done it by now, had the November 2010 elections not wiped them out.


15 posted on 10/12/2011 4:40:31 PM PDT by Azzurri
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To: Lazlo in PA
Are Democrats Eyeing 401(k)s, IRAs for Tax Hit?
You bet your @$$ they are.

As predicted, they've run out of other peoples money. If the Marxist can't pay off their voters with other peoples money, there's going to be heck to pay.

If they even talk about 401K's, pull out, and pull out fast. Starve that coveting beast. Let them use their own cushy saving accounts - to save themselves!

16 posted on 10/12/2011 4:43:09 PM PDT by concerned about politics ("Get thee behind me, Liberal")
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To: Kaslin

Yup.....you can bet that the democratcs are looking to steal this money. That’s what they do. It’s just a matter of time until they control congress again. A guy I work with just hit 59 & one half & moved all of his money out of these funds. He purchsed several rental properties. He figures he has a better chance, long term, of keeping this money in his own hands than staying with 401ks.


17 posted on 10/12/2011 4:45:39 PM PDT by LongWayHome
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To: Publius

We haven’t pulled ours out yet. Even though we still have hope it’ll come back with a more conservative admistration I’m still buying more ammunition.


18 posted on 10/12/2011 4:45:45 PM PDT by EandH Dad (sleeping giants wake up REALLY grumpy)
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To: Kaslin

Has there EVER been an avenue of wealth extraction from the American people that the democrats DIDN’T approve of?

If anything can POSSIBLY be taxed, your friendly neighborhood liberals will sure as hell think of it!

Parasites all.... From OUR wallets to THEIR favorite constituents/contributors, often times at gunpoint!


19 posted on 10/12/2011 4:48:33 PM PDT by KoRn (Department of Homeland Security, Certified - "Right Wing Extremist")
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To: Azzurri

Maybe I’m ignorant. Someone educate me please.

I thought that IRAs and 401Ks do NOT cost the government tax revenue long term.

Yes, they can claim that less is paid in taxes in the year the money is put away for retirement, but it is taxed as ordinary income in the year it’s withdrawn. So tax paid to the government in those years would be higher than they would be forecasting without IRA and 401K money.

So long term, it doesn’t “cost” the government any tax revenue, because the taxes are paid on the back end, not year by year.

If I’m wrong, somebody educate me.


20 posted on 10/12/2011 4:49:26 PM PDT by Dilbert San Diego
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To: Kaslin

One huge problem with that approach is that many companies have abandoned defined benefit pension plans in favor of 401(K) plans, with limited company participation—matching up to 6%, for instance. If that happens, many more people will end up without any retirement except for the failed Social Security System.


21 posted on 10/12/2011 4:50:33 PM PDT by RightWingConspirator (Zerobama's bus tour: the Blunder Bus Tour)
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To: Eva

The Wells Fargo/Wachovia merger, and the Bank of America/Merrill Lynch merger both were announced before the election in 2008.


22 posted on 10/12/2011 4:51:52 PM PDT by Katherine Ann
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To: Dilbert San Diego

The point is not the cost to government,. That’s just the excuse. What this is really about is the fact that this is a huge pool of money that the government wants to get its hands on. It’s for the children, you know.


23 posted on 10/12/2011 4:52:34 PM PDT by Publius
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To: Dilbert San Diego
So long term, it doesn’t “cost” the government any tax revenue, because the taxes are paid on the back end, not year by year.

Any of your money that you don't give to the government, the government considers as a "cost" to the government.

24 posted on 10/12/2011 4:52:39 PM PDT by dfwgator
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To: Kaslin
"the existing system benefits mostly the rich"

America WAS a place where you strived to better your life, for your FAMILY, for your own self-respect, and the FREEDOM to choose your path.

For Liberals, whatever someone else has EARNED, they want it GIVEN to them.

Taxing success is their idea of Utopia.

25 posted on 10/12/2011 4:53:06 PM PDT by traditional1 ("Don't gotsta worry 'bout no mo'gage, don't gotsta worry 'bout no gas; Obama gonna take care o' me!)
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To: Kaslin

This is just nonsense. Ask anyone who has an IRA what happens when you make a withdrawal. The answer: The withdrawal adds to your taxable income and is taxed at your maximum tax rate. The Government is doing better than just fine with the system they have.


26 posted on 10/12/2011 4:53:17 PM PDT by InterceptPoint
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To: Kaslin
One way to cease the process of “subsidizing” retirement systems,
is to stop all contributions,
treat contents as currently taxable income,
at current rate or some reduced rate.
And to release the residual to individuals, permanently.

To be fair, all defined contribution systems
would have to assess a current worth,
disperse that worth, and close all operations,
for the dispersed worth to be taxed exactly the same way.
This should include all municipal systems,
federal systems, and labor unions.

Additionally, to be fair,
all social security benefits
would be assessed, taxed, and dispersed,
and Social Security Closed as a system,
returning, post taxation, all worth to the individual.

I can just hear the Primal Screams

27 posted on 10/12/2011 4:55:09 PM PDT by HangnJudge
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To: Katherine Ann

Maybe before the election, but during the bail-out period.

Bush was a zombie during that period and just let the Democrats run everything.


28 posted on 10/12/2011 4:55:20 PM PDT by Eva
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To: freedumb2003
They aren't threatening your existing 401(k) balance.

What they are considering is lowering the maximum allowed contribution. It's currently $16,500/year, with an additional $5,500 if you are over 50. You simply won't be able to contribute as much in the future.

The claim is that it primarily benefits the "rich". The problem is: that's peanuts to the "rich". What's really happening is that the upper middle class (like me) is socking away as much as possible in preparation for retirement, with the expectation that Social Security is going to be "means-tested" out of existence for me.

29 posted on 10/12/2011 4:55:26 PM PDT by justlurking (The only remedy for a bad guy with a gun is a good WOMAN (Sgt. Kimberly Munley) with a gun)
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To: Dilbert San Diego
I thought that IRAs and 401Ks do NOT cost the government tax revenue long term.

That's correct, but these guys are all about pushing costs into the future. If all they are looking to do it make it through the 2012 election, what good is taxing the gains on someone's tax-deferred retirement plan 20 years from now?

30 posted on 10/12/2011 4:56:39 PM PDT by Cu Roi
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To: Kaslin

Not if they want to claim to be in faovr of the middle class.


31 posted on 10/12/2011 5:01:55 PM PDT by BenLurkin (This is not a statement of fact. It is either opinion or satire; or both)
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To: Kaslin

You know those tens of thousands 401(k)’s are driving Schumer, Reid, Durbin and all the rest of the democrats crazy. They probably sit around a table every day trying to figure out how to get hold of the millions of dollars in those IRA’s. Or, at least a way to tax them. They probably have nightmare’s thinking about all that money sitting there with DEFERRED TAXES, that can’t be taxed until the IRA’s are cashed in.


32 posted on 10/12/2011 5:02:35 PM PDT by jmax
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To: Dilbert San Diego

“So long term, it doesn’t “cost” the government any tax revenue, because the taxes are paid on the back end, not year by year.”

If you die with 401K money, your beneficiaries avoid tax on gains altogether.


33 posted on 10/12/2011 5:03:13 PM PDT by ModelBreaker
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To: SoJoCo
Since Cain’s 9-9-9 plan does not preserve the deduction for 401Ks

Good for him. I would also eliminate the mortgage deduction. All deductions gone and all taxes lowered across the board. (note: I take the max 401 every year along with a large mortgage deduction which I would lose).

34 posted on 10/12/2011 5:03:42 PM PDT by palmer (Before reading this post, please send me $2.50)
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To: freedumb2003
Even THREATEN to tax my 401(k) and I will abandon the program, take the tax hit

Tax hit plus 10% penalty if you are not yet 59 1/2 years old yet.

35 posted on 10/12/2011 5:06:44 PM PDT by Graybeard58 (Citizen Cain is good enough for me! - "refermech")
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To: freedumb2003

You’re assuming they’ll let you do that. Never underestimate the greed of Government.


36 posted on 10/12/2011 5:06:44 PM PDT by WeatherGuy
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To: dfwgator

I consider most of the money I pay in taxes “WASTED”.


37 posted on 10/12/2011 5:15:49 PM PDT by MtnClimber (The left wants our power generated by unicorns running on treadmills. What dopes!)
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To: ModelBreaker

If you die, the heirs pay tax on what they get unless they roll it over into a survivor Ira. I think they pay income tax on what they don’t roll over. Not cap gains.


38 posted on 10/12/2011 5:24:43 PM PDT by cajungirl
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To: Dilbert San Diego

Actually you probably have a lower income tax rate when you take it out. Put in in and don’t pay taxes until you retire and most people are in a lower bracket plus you don’t pay FICA on it ever.


39 posted on 10/12/2011 5:27:06 PM PDT by cajungirl
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To: Dilbert San Diego

Actually you probably have a lower income tax rate when you take it out. Put in in and don’t pay taxes until you retire and most people are in a lower bracket plus you don’t pay FICA on it ever.


40 posted on 10/12/2011 5:27:06 PM PDT by cajungirl
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To: palmer
Good for him. I would also eliminate the mortgage deduction. All deductions gone and all taxes lowered across the board.

I'm with you. Why should debt be encouraged, other than to make debt slaves out of as many as possible?

I'm also tired of government bureaucrats trying to herd everyone to their predetermined correct behavior. That's really all deductions, credits, and incentives do.

41 posted on 10/12/2011 5:33:10 PM PDT by seowulf ("If you write a whole line of zeroes, it's still---nothing"...Kira Alexandrovna Argounova)
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To: Kaslin

They don’t have to take your 401 K they will just change your tax rate at withdrawl

They are not that dumb to outright take it...


42 posted on 10/12/2011 5:40:45 PM PDT by Popman (Obama is God's curse upon the land....)
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To: Kaslin

“Are Democrats Eyeing 401(k)s, IRAs for Tax Hit?”

No; I think it’s worse than that. They’ve been talking about confiscating IRAs, 401(k)s, etc., and then redistributing to the masses. I worked in Human Resources Benefits before retiring in ‘08, and that was a topic of conversation around that time. They’re basically just going to take the money — and then give it to the losers.


43 posted on 10/12/2011 5:49:38 PM PDT by MayflowerMadam
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To: Jet Jaguar

in NYS and I imagine other states retirees DO NOT PAY STATE INCOME TAX....now we peasants without the cushy govt pensions are going to be PUNISHED because our only retirement is what we have personally SAVED!


44 posted on 10/12/2011 5:55:50 PM PDT by cherry
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To: Kaslin

IRAs and 401Ks became popular in the 1980s when Congress realized that SS would not pay everything due to the Baby Boomers.

Also, this made Wall Street happy because there would be a monthly supply of employer and employee contributions that would be invested in all kinds of investment vehicles.

The government was happy because they would get to tax the principal and the increase rather than just the value of the contribution going in, when cash out time came.

And everyone loved the penalty of 10%—the governemnt because if you cashed in early, that’s a windfall tax to them, and Wall st., becasue most people would rather not lose an additional 10%, so there is an incentive to keep the money locked in.

What could possibly go wrong?


45 posted on 10/12/2011 6:05:52 PM PDT by exit82 (Democrats are the enemies of freedom.)
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To: palmer
Good for him. I would also eliminate the mortgage deduction. All deductions gone and all taxes lowered across the board. (note: I take the max 401 every year along with a large mortgage deduction which I would lose).

Then you would be very happy under the 9-9-9 plan then.

46 posted on 10/12/2011 6:20:12 PM PDT by SoJoCo
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To: Jet Jaguar

If they try, Boston Tea Party would be a child’s play compared with what they will face.


47 posted on 10/12/2011 6:25:05 PM PDT by TigerLikesRooster (The way to crush the bourgeois is to grind them between the millstones of taxation and inflation)
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To: ModelBreaker
If you die with 401K money, your beneficiaries avoid tax on gains altogether.

If it is a tax deferred 401K, they pay taxes. If it is a Roth 401K then they don't. But they have to withdraw the money withinn 5 years if my memory serves me correctly..

48 posted on 10/12/2011 6:38:19 PM PDT by EVO X
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To: justlurking

This could quickly become a middle class vice - means testing Social Security excludes those with any savings and likely property (like Medicaid today for nursing home coverage) while limiting contributions makes it hard for those except the top 5% to save much.
Little to no SS, little to no private savings, totally abandoned to the Alpo diet.


49 posted on 10/12/2011 6:47:45 PM PDT by tbw2
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To: Kaslin

IRA’s and 401k are Tax Defered, taxes are taken out later after years of gains - the government will loose future revenues.


50 posted on 10/12/2011 6:47:51 PM PDT by PMAS
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