Posted on 10/30/2008 6:11:41 PM PDT by Libloather
McCain suggests Democrats will tax 401(k) contributions, Dems say that's 'ridiculous'
Posted by Stephen Koff/Plain Dealer Washington Bureau Chief
October 30, 2008 14:45PM
Never mind Barack Obama's tax plan, which would raise taxes for people earning more than $250,000. We already know that John McCain says that Obama wouldn't likely stop there, while Obama says he would.
But this morning in Defiance, Ohio, McCain appeared to try to ramp up worries for any worker saving for retirement: Under Democrats, your 401(k) contributions might be taxed, too.
"This Democratic Congress -- this -- this Reid-Pelosi group of liberals, including Congressman Barney Frank, is planning all sorts of new taxes this week," McCain told the Ohio crowd. "This week, we're hearing they want to tax your 401(k) contributions."
Is that true? We asked a spokesman for the House Education and Labor Committee, since this talk of taxing contributions to retirement plans appears to have come from witnesses during recent hearings there.
"It's absolutely ridiculous," said committee spokesman Aaron Albright. "We're looking to protect 401(k)s, not tax them."
His boss, Democratic Rep. George Miller of California, said the same thing Friday when asked by Neil Cavuto on Fox News. Referring to workers saving for retirement by putting pre-tax dollars into 401(k) plans, Miller said, "It's not going to work without the tax incentives."
McCain's statement this morning was based in part on news stories on congressional hearings held in the midst of the recent financial meltdown.
Among witnesses who have appeared before Miller's committee this month was Teresa Ghilarducci, a professor of economic policy analysis at the New School for Social Research. She proposed a new system of "Guaranteed Retirement Accounts," with workers putting in 5 percent of their pay and the government paying a 3 percent inflation-indexed guaranteed return. The government also would put in $600 a year per worker -- while scaling back "substantially" the 401(k) tax break on worker contributions, Ghilarducci testified.
Albright says that while there have been several ideas and witnesses at recent hearings, Miller's interest is only in making sure that retirees are not penalized by rules on 401(k) withdrawals, and that their savings be protected from excessive 401(k) administrative fees.
But Miller also mulled whether the government's $80 billion a year in 401(k) tax breaks is spurring the kind of retirement savings envisioned. Jim McDermott, a Democrat from Seattle on the House Ways and Means Committee, has had the same conversations.
Partisans appear to have taken that -- and the proposal by Ghilarducci -- as tantamount to agreeing that it's time to end the tax breaks.
Repeats Albright, Miller's spokesman: "Absolutely ridiculous."
Confiscate the wealth and put it in a lock-box. Some protection.
Go John!
“ridiculous” = “not for another 2 years”.
Those witnesses were certainly not there at the invitation of the Republicans!
I'm prepared to move everything I've got "off shore" if these pukes win.
They don’t want to tax them - they want to eliminate them altogether!
what they'll do first is make it less attractive to have a 401k...they'll call it anything they want but it means a tax increase for most US workers, and it hits most US workers who are not getting the govt pensions.....
I won't contribute....I'll cash my check, pay my bills, maybe not work as much so the tax burden is less...why contribute if you're just going to get slammed for it..
Riiiiight. And dems never lie.
Dems want tax on everything.
I heard it myself on C-Span, then Rush picked up on it the next day. There are committee hearings on this, twice that I know of.
Here’s the real kicker: Too much talk about taxing or rolling 401Ks into a government run system, and we’ll see a run not seen since the late 1920s-early 1930s.
This has been in the news for 10 days now - plenty of proof that it’s exactly what they’re up to.
http://www.freerepublic.com/focus/search?m=all;o=time;q=quick;s=401%28k%29
Why are they so far behind the curve?
- Hubert Humphrey on the Civil Rights Act
Lies, more lies and back-peddling.
Tax them? No just confiscate them outright.
For all the baby boomers looking to retire....the ‘rats want to means test 401k contributions....if u saved a lot and/or earned a lot they want to steal your $$ and/or your social security scam you have paid into forever.
It will probably be mandatory to have a 401K tax plan based on the number of employees you have and/or the amount of any company's gross income. If you are unionized, not2worry, the unions will do all this for you, regardless of what your personal desires may be.
If you don't work and collect all the benefits from Obama’s share the wealth plan then you got it made!
There will be more unemployment simply because hard-working conservatives will revolt against Obama’s plan, ergo, unemployment will increase and the prophesy of Obama will come to pass.
God help America on November 4th! Troubling times are here filling our hearts with fear. Stand strong and vote November 4th for McCain/Palin. It may not be the best choice but it's a choice that will save our Country from becoming a Communist Regime in 4 years.
BTW, those voting for Barr, I beg you not to waste your vote. Remember Perot and who we got as President in the form of William Jefferson Clinton.
end of rant/
John McCain is correct:
http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20081012/REG/310139971
Their proposal would end my ability to put up to 20% of my pay into a 401-k without any of it being taxed. They would instead limit my contribution to 5% of my pay, which presumably would not be taxed.
If I had been making a full 20% contribution, that would increase my taxable income from 80% of my take-home pay to 95% of my take-home pay. That is a tax increase.
If I want to save more money for retirement I’ll have to use after-tax dollars — but I’ll also pay taxes on the money when I withdraw it, so it will be taxed twice.
Furthermore, they would force me to put the 5% into an account with a guaranteed return of a whopping 3%. 3 freakin’ percent. Over the long haul you can average 8% a year in any decent index fund, but they’ll instead limit me to a 3% return. Over 30 years you’ll end up with a nest egg that’s about 2.4 times as large with an 8% rate of return.
Your 401-k will be worth 42% as much under the Dem proposal as it would be with more normal investments. Oh, but let’s not forget that if you invest the other 15% of your income you’ll lose roughly 40% of it to taxes, so the now after tax money you invest on the side will be worth 60% as much.
In other words, suppose you make $60,000 in 2008 dollars (constant dollars to simplify). Under current law you could put $12,000 a year into an 8% return on investment index fund 401-k and you’d have $1.36 million after 30 years.
Under this proposal, you’d be allowed to put $3,000 a year in tax-free, returning 3%, for a total of $140,000. If you put the other $9,000, after taxes, into an index fund, you’d have to discount that by a roughly 40% marginal tax rate. So that $9,000 would turn into about $610,000.
So the Democrats’ proposal would turn your $1.36 million retirement nest egg into $750,000. And all that in the name of “protecting you” from risk. Some proposal. And it’s an absolute lie to say it would not be a tax increase.
If and I mean a big if <P. There will be an underground economy.
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