Democrat Congress Trying to Eliminate 401(k) Tax Incentives

This is an article from last week, although these events happened several weeks ago. This is scary. This is bullshit. But most of all, this is the socialism that we've been worried about. Now please don't roll your eyes and disregard this article because you're tired of republican accusations against Obama's liberal financial policies. Read the article and tell me what you think.

http://emac.blogs.foxbusiness.com/20...-to-tax-401ks/

October 31, 2008 2:40PM
Beware of Congress’s Threat to Tax 401Ks
By Elizabeth MacDonald

With the bear market red in the claw, with an equal opportunity bear market taking out solid stocks right and left, with panicked investors feeling like every headline is an explosion, comes this impenetrable stupidity:

Some Democrats in Congress have held hearings that included discussions of new proposals to tax 401K money. Specifically, the idea would be to eliminate most of the $80 bn in annual tax breaks that 401(k) investors receive. Which means a nearly $80 bn tax hike.

Heavy Retirement Losses

The idea to tax 401K funds comes at a time when the Social Security trust fund is deep in the red and investors have lost nearly half of their retirement savings–$2 tn–over the past 15 months, according to the Congressional Budget Office. Retirement accounts known as 401Ks had held nearly $5 tn in savings at the start of the year.

Democrats are expected to gain seats in both the House and the Senate in the coming election. A filibuster-proof 60-seat majority is a strong possibility in the Senate, which has historically been less receptive than the House to taxing retiree funds.

In early 1968 President Lyndon Johnson made a change in the budget presentation by including Social Security and all other trust funds in a “unified budget,” which effectively let government use Social Security funds for its overall budget needs.

Gut-clenching Volatility

The Democrats’ move comes as investor fear is rampant, as investors have been experiencing increasing acid reflux ever since the subprime crisis went viral in August 2007.

Wall Street is witnessing gigantic swings never before seen in the history of the stock market, with the S&P 500 Options Volatility Index (the VIX) repeatedly breaking through the unheard of 80 barrier, twice the 40 levels that were unthinkable even when oil hit $147 a barrel this past summer-making a VIX 50 the new VIX 40.

Congress’s Support of Taxing 401Ks

House Democrats several weeks ago invited Teresa Ghilarducci, a professor at the New School of Social Research in New York City, to testify before Congress on her plan to eliminate the preferential tax treatment of 401K plans.

Specifically, Ghilarducci testified before the House Education and Labor Committee, chaired by Rep. George Miller, (D-Calif.), about her plan.

“We’ve invested $80 bn into subsidizing this activity,” Miller reportedly said in testimony, referring to tax breaks allowed for 401K contributions and savings.

With savings rates going down, “what do we have to start to think about in Congress of whether or not we want to continue and invest that $80 bn for a policy that is not generating what we … say it should?” Miller reportedly said.

House Education and Labor committee spokesman Aaron Albright emailed to say that the notion that Rep. Miller wants to tax 401K money is “absolutely ridiculous,” adding “chairman Miller wants to preserve and strengthen 401K plans, not tax them.”

Albright noted that the committee has called 11 witnesses, including retirement experts and advisors, over the last couple of weeks to assess the impact of the market’s downturn on 401Ks. He added that the committee is looking at disclosure of fees that eat into savings, as well as other measures to strengthen 401Ks.

Rep. Jim McDermott, (D-Wash.), chairman of the House Ways and Means Committee’s Subcommittee on Income Security and Family Support, has reportedly said that since “the savings rate isn’t going up for the investment of $80 bn [in 401K tax breaks], we have to start to think about whether or not we want to continue to invest that $80 bn for a policy that’s not generating what we now say it should.”

The idea being that, despite their tax-deferred status, 401K funds are not doing much to add to the nation’s savings rate.

Government Data Flawed

However, the government’s measure of the US savings rate does not include stock market gains or real estate gains, which of course have been smacked hard during the credit crisis and economic downturn. And that means the government does not count in its official savings rate the $5 tn that was invested in 401K accounts at the start of the year.

The Expert’s Tax Plan

The idea is to redirect 401K tax breaks to a new government system of guaranteed retirement accounts into which all US workers would be have to contribute.

Specifically, under Ghilarducci’s plan, the tax breaks on 401K contributions and earnings would be eliminated.

Instead, all workers would get a $600 annual inflation-adjusted subsidy from the U.S. government. The sum would be inflation-indexed. Workers then would be forced to invest 5% of their pay in a guaranteed retirement account administered by the Social Security Administration.

That money in turn would then be invested in government bonds that would pay a teensy 3% a year, adjusted for inflation, less than half the inflation-adjusted 7% return the stock market has delivered.

“I want to stop the federal subsidy of 401Ks,” Ghilarducci has said, adding, “401Ks can continue to exist, but they won’t have the benefit of the subsidy of the tax break.”

Tax Cuts Set to Expire

The idea to tax 401K accounts comes as a potential Obama Administration would let the Bush income tax cuts expire across the board.

That means even small businesses earning less than $250,000 a year would also see their taxes go up. The capital gains and dividend tax rates would also rise as well. Obama might also impose Social Security taxes on a higher level of wages and self-employment income.

Lower Taxes Help the Deficit?

As the US applies the paddles to the economy with record bailouts, a member of Congress during a recent hearing posed the question to Federal Reserve Chairman Ben Bernanke whether raising taxes during a downturn as a good idea. Bernanke’s answer: No.

And experts say lower taxes actually help the deficit. Between 2004 and 2007, when the Bush tax cuts were in full flower, the budget deficit narrowed from $413 bn to $162 bn in large part thanks to rapid growth in tax revenue, the Economist Magazine notes.

This was caused not just by rising incomes, but also by a shift in the distribution of incomes to the wealthy, who pay the highest tax rates, the magazine says. Much of that wealth came from the credit boom which drove up financial profits, salaries and bonuses as well as property and stock values and related capital gains, it adds.

The US has added the equivalent of the gross domestic product of Great Britain and something like two Canadas and five Saudi Arabias since 2003. Between year-end 2002 and year-end 2007 U.S. growth exceeded the entire size of China’s economy, Steve Forbes has noted.

However, Congress has virtually spent the amount in its bid to build a Supersize Me Government, spending that now sits squarely on the backs of taxpayers and entrepreneurs and which does not include the trillions of dollars in extra spending for the housing bailout and the bailout of Wall Street.

All proof positive that Congress has no more sense than a flock of geese.

You guys can post it five more times, but it's still not gonna happen.

yep change is coming
people wanted changed
but they did not think it could be bad
people are stupid

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Originally Posted by ChumpDumper

You guys can post it five more times, but it's still not gonna happen.

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but they got the dem have the president,house and senate

they have no excuses not to do anything

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Originally Posted by ChumpDumper

You guys can post it five more times, but it's still not gonna happen.

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I looked through like 4 back pages of this and didn't see it. Sorry if it was already posted.

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Originally Posted by ducks

but they got the dem have the president,house and senate

they have no excuses not to do anything

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If they want to keep those, they won't do anything to them.

It's a blog. You understand they can write anything? That there is no fact checking?

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Originally Posted by ducks

but they got the dem have the president,house and senate

they have no excuses not to do anything

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Thats whats genuinely scary. Nancy Pelosi is probably the biggest idiot in Washington. Harry Reid has no remorse when spending somebody else's money. And Obama has shown no indication that he will come to the center. Hes never been remotely close to the center his whole political career. Why would he start now?

These idiots can and may do this. How stupid would that be? My question is this: do the Roths go with it? What about my military pension? Are they going to give me some more bond funds instead?

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Originally Posted by exstatic

It's a blog. You understand they can write anything? That there is no fact checking?

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I just grabbed the first link I found that summarized the situation well. But this is not some "Crazy conservative" over at Fox just going out on a limb. This is really being discussed in the highest levels of gov't and there are countless articles on it online. Just because CNN isn't reporting it doesn't mean it's not fact.

If they do this, they'll be voted out in two years and it will be reversed.

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Originally Posted by ChumpDumper

If they do this, they'll be voted out in two years and it will be reversed.

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The GOP will make huge gains in 2 years no matter what. It's just the way the cycle works. Same thing happened in the Bush presidency after a GOP controlled gov't.

But once you start giving handouts to people they get used to them. And then when somebody else (usually the GOP) tries to take these horrible programs back the Dems can jump on them and slam Repubs for "taking your money from you and giving it to rich people". It's how the games played.

No, this gov't has no reason to hold back. They'll do whatever they want.

Yeah, that's what the Republicans thought when they controlled every branch of government.

What did the other 10 people called before the committee have to say?

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House Education and Labor committee spokesman Aaron Albright emailed to say that the notion that Rep. Miller wants to tax 401K money is “absolutely ridiculous,” adding “chairman Miller wants to preserve and strengthen 401K plans, not tax them.”

Albright noted that the committee has called 11 witnesses, including retirement experts and advisors, over the last couple of weeks to assess the impact of the market’s downturn on 401Ks. He added that the committee is looking at disclosure of fees that eat into savings, as well as other measures to strengthen 401Ks.

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Why is this blog cherry picking one item that was discussed?

Oh and how the fuck is ending a tax deffered status socialism? Jesus fucking Christ can you guys learn what Socialism is?

You know, obviously we expect denial-of-reality based far-right wingnuts to go the "dogs and cats living together, mass hysteria" route. But can you pace yourselves? It's only Saturday ffs. You've got four years to go all wild-eyed and ranting. Keep this up and you'll have no outrage left for when something bad actually does happen.

I posted this earlier. If they get rid of tax incentives on my 401k, I'm starting the revolution.

If they fuck with my roth I will hunt them down and shove carrots in their eyes.

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“America is the only country that went from barbarism to decadence without civilization in between.” ~ Wilde

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wtf???

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Wilde, for much of his life, advocated socialism, which he argued "will be of value simply because it will lead to individualism."

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LOL

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Originally Posted by Anti.Hero

wtf???
LOL

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This fetish you and implacable44 have for my sig is kinda cute in a creepy way.

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Originally Posted by MannyIsGod

Oh and how the fuck is ending a tax deffered status socialism? Jesus fucking Christ can you guys learn what Socialism is?

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How is it not socialism? They want to take away tax incentives that place retirement savings squarely on the shoulders of the individual and instead legislate them to be paid out by the gov't for every single American. Please explain how that is not socialistic to the core.

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Originally Posted by Darkwaters

How is it not socialism? They want to take away tax incentives that place retirement savings squarely on the shoulders of the individual and instead legislate them to be paid out by the gov't for every single American. Please explain how that is not socialistic to the core.

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Go look up the definition of socialism.

And why didn't you address the rest of my post? If you're going to post complete bullshit don't just ignore it when you get called out on it.

It's just democrats being themselves... Anti-American.

They want to control the banks, insurance, wealth... Everything. They want to take all our wealth and then have us be thankful that we get to keep some.

Think about how much of the USA wealth is in retirement accounts. Thy effectively want to seize it all, and convert it into bigger Social Security checks.

Just watch people. The democrats will do their best to take away are rights and privileges. They will take from the providers to give to the lazy scumbags. They will do it in the name of "Change" and "Fairness" and drive this nation into ruins if we let them.

Hope you Obambies are happy.

Our 401K Are down to 201K's-- how much can they take out of them-----

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Originally Posted by Biernutz

Our 401K Are down to 201K's-- how much can they take out of them-----

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You're looking at it from the wrong angle. You're buying 401k's at 201k prices!

Did anyone expect any better from the far Right? Look at how they acted during the election at those rallies, they are savages.

This is so comical...

There is no tax break tied to 401ks. It's just tax deferred. You still have to pay taxes at the end. Demos want to double tax anyone who contributes to a 401k so they can get their hands on revenue NOW to blow on pet projects.

Fuck all those jackasses. And somehow I bet if they manage to suck up the courage to pass this they will exempt themselves and their retirement program from this bullshit.

3% returns? That doesn't even keep up with inflation.

Its like motherfuckers read. Read what I fucking quoted. Just read it. Find me the testimony of the other experts brought in instead of fucking running with whatever you can spin.

You're all a bunch of intellectually dishonest dumb shits and the reason nothing ever gets done. Instead of actually acknowledging what is going on you spin this bullshit so that anyone "on your side" will start foaming at the mouth and you throw around words you don't even know the meaning to like socialism.

The least you can fucking do is at least read the bullshit that you yourselves post.

The only dumb shits are the people in D.C. that are elected and are even having this discussion or bringing in 'experts' spewing ideas like this.

There's more than the blog posted Manny. Demo Congressmen were openly saying that they were going to end the tax deferred benefits. Quit with the 'look at the source' bullshit defense that the libs know and love.

How about you link that material then? How about you look at the entire transcript of the discussion? How about you show me something that indicates there is an actually effort to move this through congress instead of some raving like an idiotic lunatic at everything that is said.

Do I really need to go looking for quotes from GOP congressmen and women on stupid shit they propose?

Its bullshit ranting from you because you guys are all bitter as hell. Nothing like this is even close to passing yet you're all acting like the fucking sky is falling because you're all butt hurt over the election results.

Yes, it will "the sky is falling" Republicans throughout BHO's presidentcy, especially those who worship Rush and Hannity.

go look it up youseelf. you aren't retarded ae you? you are one of the least intelectually honest folks on this board.
I don't have an obsession with you sig..it is just quite possible the most ludacris quote I've ever read about the usa....right above some lady saying she had never felt proud of her country until right now in 2008....I can't wait til some of this eextreme garbage starrts to happen in this push towarrds socialism. and dung..u idiot..the repubs will gain nothing in 2010..look at the seats up for re-election. ya big dummy.

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ludacris

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:lol

that's all u got? typing this from my touch pro..

Even funnier. :lmao

:lmao

Because I thoroughly enjoy making some of you look stupid on a daily basis:

There are the results of a Google news search for "401k congress"

http://www.dallasnews.com/sharedcont...n1.99fb1d.html

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Rep. George Miller, D-Calif., has proposed changes that include:
•Providing complete disclosure of all 401(k)-related fees and increasing transparency.
•Providing independent management advice to help people better manage their plans.
•Waiving the current tax penalty for seniors over 70 ½ who don't take a minimum withdrawal from their retirement accounts.
•Prohibiting privatizing Social Security.
Mr. Miller said his committee is preparing to present ideas to strengthen 401(k) and other retirement plans to the next Congress.

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http://www.cnbc.com/id/27558644


Here the professor mentioned in the OP comments herself that Democrats aren't going to implement her plan. I wonder why that wasn't discussed above? No, I really don't wonder because I already know.

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But she doubts Miller will adopt her blueprint in full.
"He wants to make 401(k)s better. He doesn't want to kill the tax deduction. In my favor, he agrees I brought up genuinely credible criticisms of the 401(k) tax break as it exists now." But Democrats may draw from parts of her proposal.
"The Democrats are looking at two paths," she said.
"One is to make the 401(k) system, which is commercial and individualized, more fair, but not do anything to expand coverage or guarantee returns." The other path is to broaden coverage and guarantee returns. "I think the compromise will be a voluntary guaranteed retirement account. So that if people don't have a 401(k), or want a better alternative to a 401(k), they could put their money into a government-guaranteed fund."

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Options would be bad right? I mean having additional ways to save for retirement is a horrible idea, right?

So this is the part where you come in and post the waves of overwhelming evidence for your outrage, right AHF? I mean you'd never embellish on here, right? I await your response eagerly.

MannyIsGod kicks some more ass.

its pretty simple to me, obama needs money to keep his campaign promises. how can he do this, tax the 401. 2 years people the democrats can do what they want. thats scary.

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Originally Posted by ChumpDumper

If they do this, they'll be voted out in two years and it will be reversed.

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Chump, believe me when I say this will be presented to the people as
some kind of crisis and that this is the only thing that will save their
savings.

I have lived in several socialist countries and believe me when I say they
can and may very well do this.

They have already gotten their foot in the door by "investing" in our
largest banks. They are fixing to get their foot in the manufacturing by
giving money to the auto makers.

The bankers were given no choice in their decision to accept government
money. They were told no one is leaving the room till they signed the
papers. That is a fact.

You all wanted the Democrats in power. You have it. Now reap the
wind.

Dickless Aggie is ST's serial "throw-some-knee-jerk-shit-and-run-away" expert. :lol

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Originally Posted by MannyIsGod

How about you link that material then? How about you look at the entire transcript of the discussion? How about you show me something that indicates there is an actually effort to move this through congress instead of some raving like an idiotic lunatic at everything that is said.

Do I really need to go looking for quotes from GOP congressmen and women on stupid shit they propose?

Its bullshit ranting from you because you guys are all bitter as hell. Nothing like this is even close to passing yet you're all acting like the fucking sky is falling because you're all butt hurt over the election results.

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The only source you need is: Barack Obama, Nancy Pelosi, Harry Reid.

But I am putting a link in to the Rush Limbaugh show. I know, I can
already hear the cat calls and BS that is to follow. But I would suggest
you read it and look at the facts he quotes. George Miller who has
oversite of the 401k is not a "stupid shit". Anyhow, it more than likely
will happen. 10 trillion dollars is a lot of money and the dimms don't
want it hanging over their heads and they have a lot more spending
they want to do.

http://www.rushlimbaugh.com/home/dai...112.guest.html

Also look at the links at the end of the transcript. WSJ is not a rag
by any means. Unlike the NYT.

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Originally Posted by boutons_

Dickless Aggie is ST's serial "throw-some-knee-jerk-shit-and-run-away" expert. :lol

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Look in the mirror asswipe :lol


Manny -

I'll have to do some hunting and get back to you. I was on the road for part of the week last week and it was in one of the newspapers I read on my flight back to Dallas (had to be either the WSJ, USAToday, or Houston Chronicle - but I think it was one of the national ones).

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Originally Posted by xrayzebra

Chump, believe me when I say this will be presented to the people as
some kind of crisis and that this is the only thing that will save their
savings.

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Yeah, there is no financial crisis right now. Move along. :lol

It's still not going to happen.

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Originally Posted by MaryAnnKilledGinger

This fetish you and implacable44 have for my sig is kinda cute in a creepy way.

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Because it is fucking stupid.

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Originally Posted by TheMadHatter

Did anyone expect any better from the far Right? Look at how they acted during the election at those rallies, they are savages.

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WTF does this even have to do with the topic.

lmao, you bring nothing but Obama dick sucking.

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Originally Posted by Aggie Hoopsfan

Look in the mirror asswipe :lol


Manny -

I'll have to do some hunting and get back to you. I was on the road for part of the week last week and it was in one of the newspapers I read on my flight back to Dallas (had to be either the WSJ, USAToday, or Houston Chronicle - but I think it was one of the national ones).

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Hunt away but where is there to find? I provided you with a proper context for why this person was brought in and what they outlined. I provided you with quotes from many people who said this is not going to happen but that the government program providing an alternative may.

Its fake outrage plain and simple because there's no proof you're going to find that this is going to happen. If there was it would be huge news and would contradict everything I found/posted.

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Originally Posted by ChumpDumper

Yeah, there is no financial crisis right now. Move along. :lol

It's still not going to happen.

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Chump this is one time I hope and pray you are right. But I have
some really bad gut feelings about this Obama's administration.
But, like I said, I hope you are right and I am wrong.