It is interesting to see how some get their talking points from MSNBC. We all pay 15% on our investment income (you, Biden, Mitt, Newt, Obama, etc.) so comparing it your 401K withdrawal, which is not investment income, is truly bogas. Second, you put your 401K monies in tax free. You could convert the 401K monies to a Roth IRA then your investment income would be zero. Now what.
When making statements like this, it would best to be correct with the logic versus repeating what Joe on MSNBC said.
Year 1 ~ put in own cash, not taxed, and matching funds, also not taxed.
Year 2 ~ retain earnings on earlier deposits in 401(k).
Doggone, the earnings in year 2 look exactly like "investment income". If all that money was in stocks (held by the account, or an investment vehicle) and it increased in value you'd say, "why doggone boss, it's a capital gain" and it wouldn't be taxed at all until it was realized as income in let's say Year 30.
So, the first year you put in $10 tax free. The second year you retain the earnings in put them into stocks, and thevalue increases, dividends are paid, etc., and by the time you get to Year 20, you've got an account that's still got that $10 that wasn't taxed initially, but you have all this other stuff that looks exactly like any investor's equity, and earnings.
The federal personal income tax should only apply to the initial deposits made in a tax free status. Everything else should benefit from the quite beneficial treatment given capital gains.