Posted on 04/22/2012 4:46:02 PM PDT by DeaconBenjamin
Uncle Sam, in a desperate attempt to fix its $16 trillion-plus deficit, is leering over Americans’ retirement nest egg as its new bailout fund.
Capitol Hill politicians are assessing tax changes that could let the Internal Revenue Service lay claim to a portion of the $18 trillion sitting in 401(k) accounts and other tax breaks used by middle-class workers, including cutting the mortgage tax deduction.
A commission looking for ways to close the deficit, and, noting the extent of 401(k) tax breaks, recommends an examination of the system as one way to prevent government bankruptcy.
Besides 401(k)s, other possibilities include the mortgage-interest deduction on second homes, as well as benefits from employer-provided health insurance, which are untaxed now.
Under current 401(k) rules, total employee/employer contributions can’t exceed $50,000. In the proposed rule change, employer/employee contributions would be limited to 20 percent of the employee’s compensation, with a maximum of $20,000, the so-called 20/20 proposal.
Another proposal being discussed in Congress says all tax deductions on 401(k)s and IRAs to be replaced with an 18 percent credit. The credit, according to a proposal that has been endorsed by economist William Gale, would be placed directly in a person’s retirement account.
“Unlike the current system,” Gale told Congress, “workers’ and firms’ contributions to employer-based 401(k) accounts would no longer be excluded from income and would be subject to taxation, contributions to IRAs would no longer be tax-deductible and any contributions to a 401(k) plan would be treated as taxable income.”
In other words, the employee and employer would no longer get a deduction under the Gale plan, they would qualify for a credit. And the credit would “increase [government] revenues by about $458 billion,” Gale says.
(Excerpt) Read more at nypost.com ...
On the Waterfront.
The government is economically gang raping those from about 45 to 65 years old, they'll take what ever they want, because the can.
Those younger, will never know any better while they get robbed and raped their entire lives to pay for massive, corrupted government.
WTF is going on?
Americans are no longer allowed to think, the MSM and Government goons will tell you what to think and when.
For a hint about what is going on, what does the normal terrorist with the name Hussein do? Will you finally get it when the terrorist in chief starts race riots and then gets to declare martial law? Or will it be when he suspends elections?
Thanks. I’ll be 59.5 next month.
This would be mind-boggling flat out stealing by our so called public “servants”.
This is one of many lines, go ahead and cross it.
Replacing a deduction with a credit is a way of ensuring that anyone with a marginal rate higher (e.g. 35%) than the credit rate (in the this case 18%) will no longer invest in the I.R.A. In addition, they don't even give you the 18%, just notionally "contribute" it to your IRA. The idea was to allow taxpayers to defer tax on investments until retirement, when, theoretically, their marginal rate will be lower. However, their taxable income may not be lower in retirement and the government may increase the tax rate between now and then. In fact, that is a near certainty.
The bottom line for such a proposal is that IRA contributions will virtually stop.
Who needs an 18% credit that you may never get in return for the privilege of paying tax on the income all over again years from now when your tax rate is HIGHER? No one will invest on those terms.
90% of government us useless...can we talk about Federal and State pensions?
This is the type of stuff that ends up in bloodshed.
A bisexual Marxist Muslim who was New Party candidate teamed up with a Globalist billioniare whose only unifying dream is to make the US bankrupt.
I said it.
The funny (not really) part of this is that the US is a chicken with its head cut off...it’s dead but runs around until the blood stops flowing.
Here in CA people are trying to figure out what to do with the oppressive government, greentards, Occupiers, illegals, gangs, welfare cases....what they don’t get is that the golden goose is already dead and eaten LAST Christmas.
When the bubble bursts, look out...it will be Thunderdome.
I must have Missed the section where they talk about what happens to all the Government Pensions and Perks
OK, now I understand - and for better or worse following you could get me subject to fines out the ying-yang as well as fired and a good potential for jail. I am a “TAX PREPARER” - a seasonal employee of a tax preparation service who receives a modest stipend for my work.
This is something for the individual to decide about his conformance to the common expectation versus a specific reading of statute. Those who read this are free to follow your advice but in terms of my clientel, I will not endanger them, myself or my firm in such efforts. The IRS is the 800 pound gorilla and has the armed revenue agents to enforce their “guilty until proven innocent” attitude.
On another subject, may I request that you flesh out your participation in Free Republic by creating your personal page? As a Newbie you can be treated as a flash-in-the-pan until we see an effort to put down roots. Welcome to the club.
The basis of the problem is that our employees in DC still perceive the problem out there as a lack of taxation and regulation.
They’re not hearing We the People
That said, this would essentially turn everything into a Roth. ...And those rules could change, too. SS was declared as a “contribution”, not a tax so they began taxing a part of it. Now, if you have ANY outside income (pension, part-time job, stocks, bonds, etc.) 15% or more is taxed. Who’s to say they won’t tax 60% of your Roth AGAIN?
And now it’s down there with your guns?
What guns? Guns hurt little furry creatures and the oppressed.
All those guns you heard about? Must be some other guy.
‘Speaking as a tax preparer, I’m getting to the point where when my clients ask what about next year, I just say - “That depends upon elections and outcomes and I cannot plan for either!”’
IF Obama is reelected, do you think the best thing to do would be to take our money out of IRAs and 401Ks, and just put it in a savings, or invest it?
Unfortunately, if this happens I think we will all be vulnerable to a more 'flexible' President no matter where we keep our currency money. Given that he has amply demonstrated no concept of capitalism beyond saying it as a throw-away word in a speech, all repositories of money are at risk.
That being said, I would be picking up my purchases of hard assets that I can take personal ownership of and then put where I want them. No one in history has been able to spend like this without provoking inflation. So with Obama and Inflation, this is me, speaking 'ex cathedra' from my bellybutton, on what I will be doing. Your results may vary and your situation is unique to you.
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