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House Democrats Contemplate Abolishing 401(k) Tax Breaks
Workforce Management ^
| October 16, 2008
| Workforce staff
Posted on 10/24/2008 2:04:09 PM PDT by RetiredArmy
House Democrats Contemplate Abolishing 401(k) Tax Breaks
Powerful House Democrats are eyeing proposals to overhaul the nations $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-California, and Rep. Jim McDermott, D-HAMAS (Washington), chairman of the House Ways and Means Committees 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 Millers 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 Ghilarduccis plan, all workers would receive a $600 annual inflation-adjusted subsidy from the U.S. government but would be required to invest 5 percent 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 percent 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, Ghilarducci said in an interview. 401(k)s can continue to exist, but they wont have the benefit of the subsidy of the tax break.
Under the current 401(k) system, investors are charged relatively high retail fees, Ghilarducci said.
I want to spend our nations dollar for retirement security better. Everybody would now be covered if the plan were adopted, Ghilarducci said.
She has been in contact with Miller and McDermott about her plan, and they are interested in pursuing it, she said.
This [plan] certainly is intriguing, said Mike DeCesare, press secretary for McDermott.
That is part of the discussion, he said.
While Miller stopped short of calling for Ghilarduccis plan at the hearing last week, he was clearly against continuing tax breaks as they currently exist.
Savings rate
The savings rate isnt 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 thats not generating what we now say it should.
From where I sit thats just crazy, said John Belluardo, president of Stewardship Financial Services Inc. in Tarrytown, New York. A lot of people contribute to their 401(k)s because of the match of the employer, he said. Belluardos 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, Belluardo said.
This is a battle between liberalism and conservatism, said Christopher Van Slyke, a partner in the La Jolla, California, advisory firm Trovena, 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 America 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 advisors to provide advice for 401(k) plans was also addressed at the hearing. Rep. Robert Andrews, D-New Jersey, was critical of Department of Labor proposals made in August that would allow advisors to give individual advice if the advice was generated using a computer model.
Andrews characterized the proposals as loopholes and said that investment advice should not be given by advisors who have a direct interest in the sale of financial products.
The Pension Protection Act of 2006 contains provisions making it easier for investment advisors to give individualized counseling to 401(k) holders.
In retrospect that doesnt seem like such a good idea to me, 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.
On Thursday, October 9, the Department of Labor hastily scheduled a public hearing on the issue in Washington for Tuesday, October 21.
The agency does not frequently hold public hearings on its proposals.
Filed by Sara Hansard of Investment News, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.
TOPICS:
KEYWORDS: 110th; 401k; cheatingdimocrats; ira; pelosi; retirement; rothira; taxes; taxincrease
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To: JimSEA
Remember now, only racists would criticize this plan and call it socialist. I call it reparations - along with about 90% of the Great Society and its progeny.
81
posted on
10/24/2008 4:12:51 PM PDT
by
Ken H
To: Post Toasties
Yeah, the secret new tax is different but the basic outlines are REMARKABLY SIMILAR ~ to wit, using Social Security as an alleged investment vehicle.
You also missed the part about "mandatory" too. All same thing GI, just a bunch of Leftwingtards not waiting until "W"'s administration is history to cherry pick the ideas.
82
posted on
10/24/2008 4:22:19 PM PDT
by
muawiyah
To: Ken H
Remember, after the election and if it results in an Obama Nation, these socialists will introduce "means testing" so the rich can't "rip off" the Social Security system. One of the punishment of living in the Northwest is that you can listen to McDermett and my congresscritter, DeFasio and know what is coming down the pike.
If we do have an Obama Nation, I just may stay overseas and vote by long distance.
83
posted on
10/24/2008 4:27:46 PM PDT
by
JimSEA
(just another liberal-bashing fearmonger)
To: RetiredArmy
84
posted on
10/24/2008 4:30:37 PM PDT
by
Kudsman
To: muawiyah
To my knowledge, there was nothing ‘mandatory’ about GWB’s proposal, which is another difference.
85
posted on
10/24/2008 4:33:24 PM PDT
by
Post Toasties
(It's not a smear if it's true.)
To: Always Independent
Maybe we should all just up and pull our money out now blaming it on fear of what the DEMONS are planning to do. What kind of damamge to our financial system do think that will cause?The only thing you should ask is whether it will help or hurt you. You don't owe anything to a pack of lemmings willing to vote away their liberty.
86
posted on
10/24/2008 4:35:48 PM PDT
by
TigersEye
(Intellectuals only exist if you think they do.)
To: Always Independent
He will give them blood and they will love him for it! Sound familiar?One Roman Senator speaking to another regarding one of the corrupt Ceasars?
87
posted on
10/24/2008 4:37:50 PM PDT
by
Kudsman
To: Post Toasties
Sure there was. It was deceptively simple. You continued to pay Social Security Tax. That's mandatory. You could elect to have some of it diverted to the stock market.
Still, it's the initial funding activity that's most critical in these plans.
Obamasama's Mad Bomber Associate cronies here propose creting an add on ~ that is, a higher tax level, and allowing that to go to US securities.
All same thing GI. Mandatory is mandatory. More is more. Frankly, I think it's common theft to attempt to graft previously voluntary 401(k) money into the Social Security tree. I will shortly be moving my money out of my IRAs to Canada, or maybe even Mexico (to dollar denominated accounts). How about you.
88
posted on
10/24/2008 4:39:45 PM PDT
by
muawiyah
To: Mrs. P
Our current Rep is retiring. It may well be our new Rep will be a Democrat, and the first order of business he has will be to handle threats by citizens to burn out his family.
Not nice situation coming up. These guys are totally unprepared for it, still their Leftwingtard buddies are threatening to steal everyone's life savings, and that's gotta' generate some sort of resistance.
89
posted on
10/24/2008 4:42:23 PM PDT
by
muawiyah
To: Always Independent
Wonder if fear qulifies as a hardship withdrawl??NO but a negative cash flow is justification for hardship withdrawal. Got to get started looking like a deadbeat I guess.
90
posted on
10/24/2008 4:43:51 PM PDT
by
Kudsman
To: TigersEye
Well if the MSM reports on it. Bush’s fault.
To: Kudsman
From the new axis of evil, Reid, Pelosi and Obama!
To: meyer
I have always felt the 2nd ammendment was meant for preventing those that want to take away government of the people, by the people and for the people. Who better to protect that more perfect union than “the people” with guns. The funny thing I hear often from the far left liberals is that they want to rise up and revolt. They fail to take into account that many more private weapons are owned by conservatives than themselves. The last I checked, the USA private citizens have almost 40% of all small arms in the world. Once a liberal revolution would spill out to the suburbs and the countryside, it would be doomed.
93
posted on
10/24/2008 4:57:54 PM PDT
by
dirtman
To: RetiredArmy
Their recent rhetoric and actions make me think they’re trying to provoke violence. They may well get it...
94
posted on
10/24/2008 5:08:59 PM PDT
by
clintonh8r
("My friends, we've got them just where we want them." McCain. Or Custer.)
To: dirtman
...many more private weapons are owned by conservatives than themselves. I've not seen any surveys, but that sounds very reasonable. I would also think that the least armed people are white liberals in democrat controlled cities. They are the ones who will be chewed up if things go to hell-in-a-handbasket.
95
posted on
10/24/2008 5:15:17 PM PDT
by
Ken H
To: RetiredArmy
I remember hearing Obama at one of his rallies laughing and agreeing with a supporter when the supporter said his 401K was looking like a 101K because of the financial crisis...guess we know now what Obama was actually laughing about...and thinking..."sucka"...
96
posted on
10/24/2008 5:37:14 PM PDT
by
~Vor~
(It is better to shoot for the stars and miss than to aim for the gutter and hit it...Anonymous)
To: RetiredArmy
"....Powerful House Democrats are eyeing proposals to overhaul the nations $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-California, and Rep. Jim McDermott, D-Washington, chairman of the House Ways and Means Committees 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 Millers Education and Labor Committee on her proposal...."
The New School for Social Research
The Department of Political Science at The New School for Social Research takes a distinctive approach to the study of politics. We emphasize the theoretical dimension of political analysis with regard to both political explanation and normative evaluation. We focus on the historical roots of contemporary political forces and problems. Faculty members are interested in how institutions shape political life, in the intersection between political and cultural processes, and in classical and current versions of political economy.
Students belong to a community of scholars constituted by faculty and students from The New School for Social Research as a whole. The Department of Political Science contributes to this community through classes, research projects, and conferences.
For example, the International Center for Migration, Ethnicity, and Citizenship, directed by Aristide Zolberg, engages in research, policy analysis, and graduate education bearing on international migration, refugees, and the incorporation of newcomers into host societies. Visiting professors are an important part of our departments life. These distinguished scholars join our faculty on a regular basis and help supervise students work, including dissertations.
The New School is one of the sources sited in the article.
Faculty: Political Science Dept.
Andrew Arato, Dorothy Hart Hirshon Professor of Political and Social Theory
Banu Bargu, Assistant Professor in Political Science
Daniel Dayan, Visiting Professor
Carlos Forment, Associate Professor of Sociology
Nancy Fraser, Henry A. and Louise Loeb Professor of Political and Social Science
Ellen Freeberg, Assistant Dean, New School for Social Research and Affiliated Faculty, Political Science
Philip Green, Part-Time Faculty
Victoria Hattam, Department Chair and Professor of Political Science
Agnes Heller, Hannah Arendt Professor of Philosophy and Political Science
Mala Htun, Associate Professor of Political Science
Courtney Jung, Associate Professor of Political Science
Andreas Kalyvas, Assistant Professor of Political Science
Ronald Kassimir, Associate Professor of Political Science
Riva Kastoryano, Visiting Professor
James Miller, Professor of Political Science and Liberal Studies
Timothy Pachirat, Assistant Professor of Politics
David Plotke, Historical Studies Department Chair, Professor of Political Science
Ross Poole, Adjunct Professor of Political Science and Philosophy
Sanjay Ruparelia, Assistant Professor of Political Science
Aristide Zolberg, Walter P. Eberstadt Professor of Political Science; Director of the International Center for...
_________________________
Economics:
The Department of Economics offers a broad and critical approach to the study of economics, covering a wide range of schools of thought, including Keynesian and post-Keynesian economics;
the classical political economy of Smith, Ricardo, and Marx; structuralist and institutionalist approaches to economics; and neoclassical economics. The courses of study emphasize the historical roots of economic ideas, their application to contemporary economic policy debates, and conflicting explanations and interpretations of economic phenomena, within the context of a rigorous training in the conceptual, mathematical, and statistical modeling techniques that are the common methodological basis of contemporary economic research. The department's work centers on the changing shape of the world economy; its financial markets and institutions; problems of regulating and guiding economic development in the advanced industrial world and in emerging markets; complexity in economic systems; and the economic aspects of class, gender, and ethnic divisions.
Faculty:
Lopamudra Banerjee, Assistant Professor of Economics.
Lucas Bernard, Part-time Faculty Member
Michael Binder, Part-Time Faculty
Duncan Foley, Leo Model Professor of Economics
Teresa Ghilarducci, Professor of Economics.Bernard L. and Irene Schwartz Chair in Economic Policy Analysis.
M. Ali Khan, Part-Time Faculty
William Milberg, Associate Professor of Economics
Deepak Nayyar, Distinguished University Professor of Economics
Salih Neftci, Professor of Economics Edward Nell, Chair and Malcolm B. Smith Professor of Economics.
Willi Semmler, Professor of Economics.
Anwar Shaikh, Professor of Economics
Lance Taylor, Arnhold Professor of International Cooperation and Development. Director, Center for Economic Po...
97
posted on
10/24/2008 6:44:19 PM PDT
by
Islander7
(This Atlas is shrugging! ~ I am Joe!)
To: RetiredArmy
This is a few Democrats from very poor sections speaking. Does anyone actually believe that a representative from a middle class area is going to go back to his constituents and tell them he voted to take away their life savings in one fell swoop. This thing has absolutely no chance of passing, but i sure hope they try.
98
posted on
10/24/2008 6:55:19 PM PDT
by
yazoo
To: Ken H
Those liberals desiring a revolution assume the various armed gov’t agencies will blindly follow orders to destroy the counter-revolution forces,i.e. you and me.
99
posted on
10/24/2008 7:10:02 PM PDT
by
hoosierham
(Waddaya mean Freedom isn't free ?;will you take a creditcard?)
To: Islander7
Thanks for the post... and the bold print.
‘Rat criminal/collectivist/socialist syndicate BUMP!
100
posted on
10/24/2008 9:26:13 PM PDT
by
PGalt
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