House Democrats contemplate abolishing 401(k) tax breaks

[Wretched Excess]

THIS is our future if the white house and congress are both in the hands of the democrat party.

House Democrats contemplate abolishing 401(k) tax breaks

Powerful House Democrats are eyeing proposals to overhaul the nation's $3 trillion 401(k) system, including the elimination of most of the $80 billion in annual tax breaks that 401(k) investors receive.

House Education and Labor Committee Chairman George Miller, D-Calif., and Rep. Jim McDermott, D-Wash., chairman of the House Ways and Means Committee's Subcommittee on Income Security and Family Support, are looking at redirecting those tax breaks to a new system of guaranteed retirement accounts to which all workers would be obliged to contribute.

A plan by Teresa Ghilarducci, professor of economic-policy analysis at The New School for Social Research in New York, contains elements that are being considered. She testified last week before Mr. Miller's Education and Labor Committee on her proposal.

At that hearing, the director of the Congressional Budget Office, Peter Orszag, testified that some $2 trillion in retirement savings has been lost over the past 15 months.

Under Ms. Ghilarducci's plan, all workers would receive a $600 annual inflation-adjusted subsidy from the U.S. government but would be required to invest 5% of their pay into a guaranteed retirement account administered by the Social Security Administration. The money in turn would be invested in special government bonds that would pay 3% a year, adjusted for inflation.

The current system of providing tax breaks on 401(k) contributions and earnings would be eliminated.

"I want to stop the federal subsidy of 401(k)s," Ms. Ghilarducci said in an interview. "401(k)s can continue to exist, but they won't have the benefit of the subsidy of the tax break."

More

[djones520]

I was wondering where Obama was planning on getting the money for his programs from...  So he won't be directly taxing us, just indirectly. 

[USA4ME]

Was there ever any doubt that the people with targets on their back were the middle class and poor?

Haven't the libs been screaming about how some are willing to sell their freedom for the hope of a little security?  Social Security already does that, and this just piles on.

.

[miskie]

I was wondering where Obama was planning on getting the money for his programs from...  So he won't be directly taxing us, just indirectly. 

It has to come from someplace - So, instead of making lots of 'new' taxes that will get bad press, he will let current tax breaks/cuts 'expire' and 'close loopholes' - sounds so much better.

[Splashdown]

Is there any more of a blatant tax on the middle and working class than taxing the 401(k)?

[SSG Snuggle Bunny]

Is there any more of a blatant tax on the middle and working class than taxing the 401(k)?

Blatant powergrab to force you into gov't dependency as well.

[djones520]

What I'm curious about is if this'll affect the break I get with my TSP (federal employees equivalent to a 401k).

[Wretched Excess]

Was there ever any doubt that the people with targets on their back were the middle class and poor?

Haven't the libs been screaming about how some are willing to sell their freedom for the hope of a little security?  Social Security already does that, and this just piles on.

.

not in my mind.  anyone that thought that his tax plan wold even come close to funding his domestic agenda (much less his foreign policy handouts) was delusional.

[Splashdown]

There ALREADY is a "retirement system" which we're obliged to contribute. It's called Social Security.

How's that working out? 

[Wretched Excess]

There ALREADY is a "retirement system" which we're obliged to contribute. It's called Social Security.

How's that working out? 

they broke that one.  so they are going to build something else that will only serve as a mechanism to achieve their arbitrary and capricious definition of "social justice", which they will in turn bankrupt in a decade or so.

[docstew]

What I'm curious about is if this'll affect the break I get with my TSP (federal employees equivalent to a 401k).

that was my first thought too... leaving it all in t-bills looks better all the time

[NHSparky]

And if they take away the tax breaks for 401(k)'s, you can bet your ass that your company will take away a significant portion of the match you currently receive.

[Wretched Excess]

And if they take away the tax breaks for 401(k)'s, you can bet your ass that your company will take away a significant portion of the match you currently receive.

if the gov't takes away the tax breaks for 401k's, the resulting crash will make the current market situation seem mild in comparison.

[Chris]

George Miller, D-Calif., and Rep. Jim McDermott, D-Wash., chairman of the House Ways and Means Committee's Subcommittee on Income Security and Family Support, are looking at redirecting those tax breaks to a new system of guaranteed retirement accounts to which all workers would be obliged to contribute.

Don't we already have this, and didn't the Democrats boo President Bush when he said he wanted to fix it? 

[thundley4]

Don't we already have this, and didn't the Democrats boo President Bush when he said he wanted to fix it? 

a new system of guaranteed retirement accounts to which all workers would be obliged to contribute.

I Thought that was kind of Bush's plan with the exception that people could invest it on their own.  Obviously the Dems are just taking more power for themselves.

[DixieBelle]

Okay, my blood runs cold when I read the words: all workers obliged to contribute.

[Carl]

Under Ms. Ghilarducci's plan, all workers would receive a $600 annual inflation-adjusted subsidy from the U.S. government but would be required to invest 5% of their pay

I guess this means that employers won`t be contributing anything now so that will free up more money for the dems to tax away.

[paladin0]

That would kill 401(k) and ROTHs would be their replacement.

Paladin0

[Airwolf]

Well I guess we;ll never get to retire because they'll get the money and we get screwed again. How in GOD's name this country could ever comtemplate voting those thieves into office I'll never know.

[rich_t]

What I'm curious about is if this'll affect the break I get with my TSP (federal employees equivalent to a 401k).

I suspect it might; it's my understanding that the TSP program is governed largely by the same rules and regulations that govern the 401k program.

[rich_t]

And if they take away the tax breaks for 401(k)'s, you can bet your ass that your company will take away a significant portion of the match you currently receive.

Why do you say that?  I will admit my ignorance here, do companies also get a tax break on their matching contribution to a 401K? 

To be honest, the only reason I contribute to my 401K is the company match, if wasn't for that I would simply invest my money in taxable money market accounts, mutual funds, stocks and bonds.

I personally don't care about the tax deferment, which is why the bulk of my investments are not in tax deferred accounts.  It's my money.  I put it aside.  I dont agree with paying a penalty for cashing in part of my own money. 

[Lacarnut]

Why do you say that?  I will admit my ignorance here, do companies also get a tax break on their matching contribution to a 401K? 

To be honest, the only reason I contribute to my 401K is the company match, if wasn't for that I would simply invest my money in taxable money market accounts, mutual funds, stocks and bonds.

I personally don't care about the tax deferment, which is why the bulk of my investments are not in tax deferred accounts.  It's my money.  I put it aside.  I dont agree with paying a penalty for cashing in part of my own money. 

Not paying taxes up front on a 401 rather than at the end of your employment allows your money to grow faster. Secondly, your retirement income will be in all likelyhood less putting you in a lower tax bracket when you get ready to start drawing it out.

[formerlurker]

What?!!!!

[Zeus]

That would kill 401(k) and ROTHs would be their replacement.

Paladin0

Upside is the money not at the disposal of the govt. Downside ROTH Ira's are after tax contributions. Roth Ira contributions are also Limited to $5000/yr for a married couple. Indexed for inflation beginning in 2009.

[Zeus]

Why do you say that?  I will admit my ignorance here, do companies also get a tax break on their matching contribution to a 401K? 

To be honest, the only reason I contribute to my 401K is the company match, if wasn't for that I would simply invest my money in taxable money market accounts, mutual funds, stocks and bonds.

I personally don't care about the tax deferment, which is why the bulk of my investments are not in tax deferred accounts.  It's my money.  I put it aside.  I dont agree with paying a penalty for cashing in part of my own money. 

Tax deffered investments effectively give an Individual an instant percentage savings equivalent to their current tax rate. That additional money also helps in compounding the value of an Investment.