Posted on 10/16/2008 8:32:17 PM PDT by Keyes2000mt
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.
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.
"The savings rate isn't going up for the investment of $80 billion," he said. "We have to start to think about ... whether or not we want to continue to invest that $80 billion for a policy that's not generating what we now say it should."
"From where I sit that's just crazy," said John Belluardo, president of Stewardship Financial Services Inc. in Tarrytown, N.Y. "A lot of people contribute to their 401(k)s because of the match of the em-ployer," he said. Mr. Belluardo's firm does not manage assets directly.
Higher-income employers provide matching funds to employee plans so that they can qualify for tax benefits for their own defined contribution plans, he said.
"If the tax deferral goes away, the employers have no reason to do the matches, which primarily help people in the lower income brackets," Mr. Belluardo said.
"This is a battle between liberalism and conservatism," said Christopher Van Slyke, a partner in the La Jolla, Calif., advisory firm Trovena LLC, which manages $400 million. "People are afraid because their accounts are seeing some volatility, so Democrats will seize on the opportunity to attack a program where investors control their own destiny," he said.
The Profit Sharing/ 401(k) Council of America in Chicago, which represents employers that sponsor defined contribution plans, is "staunchly committed to keeping the employee benefit system in American voluntary," said Ed Ferrigno, vice president in the Washington office.
"Some of the tenor [of the hearing last week] that the entire system should be based on the activities of the markets in the last 90 days is not the way to judge the system," he said.
No legislative proposals have been introduced and Congress is out of session until next year.
However, most political observers believe that Democrats are poised to gain seats in both the House and the Senate, so comments made by the mostly Democratic members who attended the hearing could be a harbinger of things to come.
ADVICE AT ISSUE
In addition to tax breaks for 401(k)s, the issue of allowing investment advisers to provide advice for 401(k) plans was also addressed at the hearing. Rep. Robert Andrews, D-N.J., was critical of Department of Labor proposals made in August that would allow advisers to give individual advice if the advice was generated using a computer model.
Mr. Andrews characterized the proposals as "loopholes" and said that investment advice should not be given by advisers who have a direct interest in the sale of financial products.
The Pension Protection Act of 2006 contains provisions making it easier for investment advisers to give individualized counseling to 401(k) holders.
"In retrospect that doesn't seem like such a good idea to me," Mr. Andrews said. "This is an issue I think we have to revisit. I frankly think that the compromise we struck in 2006 is not terribly workable or wise," he said.
Last Thursday, the Department of Labor hastily scheduled a public hearing on the issue in Washington for Oct. 21.
The agency does not frequently hold public hearings on its proposals.
He might not even have to. McCain could just tie him to this via all his votes that match votes by Pelosi, Reid and their crowd. For added punch, he could remind people that the last Dem president promised middle class tax cuts as a cure for "the worst economy in 50 years" and then passed a Social Security tax hike instead.
I am praying so hard they try to do this. It has no chance of passing but would be such a great issue for the Republicans. It seems as if Obama will give the middle class a tax cut on one end, then take more of it from people who try and save the money they got from their tax cut. Only the Dems could think up this kind of shell game and do it with a straight face.
This needs to be out in the news and on the trail big time. Voters should know that the Dimmycrats are once again trying to bilk the taxpayer. Vote also MUST know if the senate and congress gets infested with rats AND Obamer we are hodes big time.
God help us if they pull this off and people believe their lies.
This IS a major tax increase — for everyone who has a 401K.
But you can forget about that "hope" part...
NTSA.
Anyone who has a 401K is obviously “rich”. Why should the government give them anything?
Im headed that way for Christmas, look it over. Como se dici,,color me gone, and yes, Ill be takin my money with me. When all the money leaves, all these lazy POS can have this place. Reminds me of when I lived in New Orleans about three decades ago. They started renaming high schools, renaming streets, all the folks with money left and moved to the North Shore. Took their tax money with em. Now the New Orleans PD cant even afford to replace a hub cap on a cop car.
It may be, because Dems raising taxes is like a dog returning to its' vomit.
However, this is the fault of the republican party that has abandoned conservative principles and those of us that have not held them accountable for doing so.
Check out Utila.........
Forget about the impact to individual savings, think of the capital formation benefits ! Among the reasons there has been economic growth previously is because there is capital to be raised by deserving new companies in a market that has steady inflows. Every other Thursdaym ecery other Thursday, in it comes...Without a going and growing economy 401 accounts arent worth a bleep. Without 401 the only capital formation vehicles will be under govt. control
Change.. Obamah will take it from you and spread it around.
“Better dump those 401ks as soon as possible if the RATS get in...”
I’m going further than that; I will take early retirement (age 56) get my cash pay off ALL debts and mortgage. And be ready to collect Obamas money and free health care... LOL
Obama leaves me no other rational choice......
Maybe I can pick up money working for ACORN. /sarc off
So, let me get this straight. They glom onto an additional $80 billion in annual tax revenues, AND then confiscate a pittance from the lower echelon who wouldn’t/couldn’t contribute. Maybe they even redistribute a small percentage to the masses under the guise of helping...
Boy, am I glad my nickname is Dick and not my appellation.
Of course you are absolutely correct. Capital formation creates wealth and enables the stock market to go higher. This provides more taxes for the gov't and a higher 401K benefit, which is a win-win for gov't and the individual.
I just omitted a few steps in my explanation! Thanks for filling them in!
Thanks, just googled it; have some friends and associates on the east side of Guatemala. Looks good.
Welcome.......
We have a chance to abolish them in a week or so, get on it, let em see and feel how it feels when their savings is messed with!
Yes, we do. It reminds me of the Nietzsche quote: If you stare into the Abyss long enough the Abyss stares back at you.
We’ve been staring into this one for decades and now it’s got its evil nose pressed against the outside of our livingroom windows glaring at us.
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