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View Full Version : House Democrats contemplate abolishing 401(k) tax breaks



stephanie
10-16-2008, 11:47 PM
wtf??

By Sara Hansard
October 12, 2008, 6:01 AM EST Post a Comment Recommend (49)


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.


Getty ImagesGeorge Miller: Looking at redirecting tax breaks to a new system of guaranteed retirement accounts. 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 Ms. Ghilarducci's plan, all workers would receive a $600 annual inflation-adjusted subsidy from the U.S. government but would be required to invest 5% 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% 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," Ms. Ghilarducci said in an interview. "401(k)s can continue to exist, but they won't have the benefit of the subsidy of the tax break."

Under the current 401(k) system, investors are charged relatively high retail fees, Ms. Ghilarducci said.

"I want to spend our nation's dollar for retirement security better. Everybody would now be covered" if the plan were adopted, Ms. Ghilarducci said.

She has been in contact with Mr. Miller and Mr. McDermott about her plan, and they are interested in pursuing it, she said.

"This [plan] certainly is intriguing," said Mike DeCesare, press secretary for Mr. McDermott.

"That is part of the discussion," he said.

While Mr. Miller stopped short of calling for Ms. Ghilarducci's plan at the hearing last week, he was clearly against continuing tax breaks as they currently exist.

SAVINGS RATE

John Belluardo: "If the tax deferral goes away, the employers have no reason to do the matches, which primarily help people in the lower income brackets." "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.


read the rest..
http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20081012/REG/310139971

MtnBiker
10-16-2008, 11:53 PM
Congressional democrats should go ahead and make a bill that would require all US citizens to travel to Washington DC at least once a year at which time they would go to the capital building and bend over so congress can really screw us!

theHawk
10-17-2008, 12:03 AM
Liberals would love nothing more than to destroy everyone's retirement funds. Then they'd have an elderly population completely dependant on Uncle Sam.

PostmodernProphet
10-17-2008, 06:01 AM
to a new system of guaranteed retirement accounts to which all workers would be obliged to contribute.

??....they want to create a second "social security system"?......why not just fix the first one?.....

Immanuel
10-17-2008, 07:16 AM
Well, that is one way to eliminate the disatisfaction with the Social inSecurity system, eliminate the competition. If you take the tax break away from saving for retirement, people are not going to save for retirement and then they will all depend on the Democrats in their retirement years.

What idiot? Wait a minute... did you read this?


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.

My God... do you realize what they are saying?

They are privitizing forced retirement savings. That is nothing more than privitizing Social Security!!!

They are actually attempting to do what you liberals have said was a disaster waiting to happen.



"I want to stop the federal subsidy of 401(k)s," Ms. Ghilarducci said in an interview. "401(k)s can continue to exist, but they won't have the benefit of the subsidy of the tax break."

"I want to spend our nation's dollar for retirement security better. Everybody would now be covered" if the plan were adopted, Ms. Ghilarducci said.

That is just more liberal BS for, "The Government can spend your money better than you can"

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Well, now I know that the Dems were just waiting for control to take credit for privitization of Social Security.

Immie