This plan is NOT about taxing 401k money (I’m not saying that won’t happen, just that this isn’t doing so). Currently money contributed to a 401k is not taxed — a full deduction is allowed for such contributions. Under Biden’s plan, there is no more deduction, but you receive a 26% tax credit on contributions.
This would benefit anyone whose marginal tax rate is lower than 26%. A deduction is mathematically equivalent to no deduction plus a credit equal to your marginal tax rate. If you.pay 26%, you break even. Essentially it amounts to paying people to fund their 401k. (For most people, since most don’t pay 26% taxes). Obviously those who earn enough to pay over 26% taxes would foot the bill.
Probably it will be popular since it benefits more people than it harms, but it certainly is a tax increase on higher income Americans. I would personally benefit, but a tax increase is never a good idea.
Stemba-U R smart. I had a retirement(lump sum), a 401k(big employer) and SSI. Not fair to the poorer chumps out there. Is Biden’s plan really in the interest of the millennials? No mention of Roth IRA’s, something the rats can’t handle. Get them out of SSI-rat’s won’t allow it. With this plan the rats are getting the jump on us. We have to be smarter, an uneasy task.
It’s always done this way. The majority benefits under the initial proposal so they don’t object. (”F’ those rich people, I’m making out!”)
Later the numbers will be changed, so those willing to rob the “rich folks” end up getting robbed too. And in the end, it will end up hurting those all too willing to screw others even more.
File it under: another tax on the “stupid and greedy”.
Sounds like a totally discretionary tax to me. Going to get shafted with a high contribution tax rate? Simple, don't contribute. In other words, if the tax impact is about the same then screw contributing to a 401K with all the limitations and restrictions you get with one. Just take the money in salary (after tax) and invest as you wish.
Then who's footing the bill?