2460 Days or So Early

A few days ago I wrote:

I would be willing to bet him that within the decade, it will become a mainstream idea in the progressive community to fund shortfalls in Social Security and Medicare with a full or partial seizure of 401K's.

This is not quite there, but it sure shows that they are thinking in this direction

The senior administration official said that wealthy taxpayers can currently “accumulate many millions of dollars in these accounts, substantially more than is needed to fund reasonable levels of retirement saving.”

Under the plan, a taxpayer’s tax-preferred retirement account, like an IRA, could not finance more than $205,000 per year of retirement – or right around $3 million this year.

Wealth taxes on large pools of savings are not far behind

  • SamWah

    and soon we will all be the "rich" whose money is taken.

  • HenryBowman419

    I think perhaps the major reason that the U.S. government might not steal funds from 401(k) plans is simply that many, many attorneys have a lot of money in such accounts, and such folks typically give a lot of money to the Democrat Party.

  • randian

    What if I think I need more in case of a downturn? Obama wants to steal my upside, but leave me vulnerable to downside risk.

  • Taxpayer

    Wonder how many Congress Critters have tax payer funded defined benefit plans worth more $3 million.

  • rowbigred26

    "The proposal would save around $9 billion over a decade, a senior
    administration official said, while also bringing more FAIRNESS to the
    tax code." These clowns couldn't define fairness if they tried. It's not fair that you get to contribute to your retirement account! It's not fair that you make more money than me! It's not fair that you pay more taxes than me! Oh wait, I mean it is fair that you pay more taxes than me...but not fair enough!

  • NL7

    I have to say I do not entirely agree; or rather I agree, but it depends on the details. I don't see them doing wholesale Cypriot-style takings of 401(k)s or IRAs. And I also don't see them hitting Roth accounts (which are taxable at deposit but not at qualified withdrawal) with exit taxes. But I could easily see them capping the future availability of such accounts, as Obama just discussed. I could also see them arranging for some sort of special surtax on 'excessive' deposits into retirement and benefit accounts, but maybe in aggregate less than 39.6%.

    They're also talking about the tax benefits of various stock option rules. For example, Zuckerberg cashed in at the IPO exit event, and because of compensation rules Facebook will get to claim the entire amount as deductible. So Facebook gets a billion dollar deduction from its taxes, with carryforwards to future tax years. I could easily see Congress capping this amount, either by limiting it to a "reasonable amount," or by some static figure like $1M, or some multiple of annual non-stock compensation.

    And of course, simply depriving high-paid workers of full access to the beneficial tax rules is an immediate tax increase going forward. It will raise less money as companies rearrange to try and avoid the tax, but it serves their political goal of sticking it to the rich guys.

  • randian

    I don't see what purpose capping withdrawals would serve. Not unless their goal is

    1) to stick your heirs with estate tax by preventing you from spending down your estate, or
    2) to keep the cap less than your RMD, sticking you with penalties for insufficient withdrawal

    Both seem somewhat iffy.

    If you're a govt employee with a pension of $40k or so, or higher, you have a million dollar pension. So many govt employees deny they're going to be millionaires at retirement. I can't tell if they're ignorant or mendacious.

  • LarryGross

    this is SO right wing conspiratorial! geeze! is there no end to this tripe!

  • marque2

    It is in Obama's current budget plan, not some right wing conservative think tank playbook.

  • marque2

    #2 bingo - it will prevent the rich from investing in 401k's /Rollover IRAs in the first place, because they will be penelized for not pulling out enough money. Heirs would have the same issue eventually.
    Money not invested in a 401K today, is money that theoretically is taxed today, bringing in more current revenue.
    Of course the rich are going to do other things. Personally I am planning to put more of my investments the government is unlikely to touch. Of course in 20 years when there is no money left - they will go after everything.

  • http://www.facebook.com/people/Joshua-Vanderberg/100000013695888 Joshua Vanderberg

    And the Roth IRA will be taxed eventually, at least for high income/savings earners.

  • marque2

    Well they got .075% of that 1.2 trillion deficit covered with this. Now we need 1333 more ideas like this to get rid of the deficit completely!
    I can't believe they are going after peanuts like this. Of course like all of Obama's other budgets, I am sure this one will also be dead on arrival, garnering 0 votes yet again.

  • marque2

    Warren buffet gives tons of money to the Democrats, and I bet he supports a law like this. He stores his money in other ways, and gets gifts from the administration, that allow him to pocket a billion here and there on bank investments, and rail investments to move keystone oil, etc.

  • randian

    Earnings are too easily manipulated for that to work. I haven't seen a wealth-related tax on IRAs suggested yet.

  • Nick P.

    So note to self then, don't store wealth in something that can be drained by government decree.

  • MingoV

    The proponents of confiscating IRA money always omit the fact that IRA withdrawals are taxable. A person withdrawing $200,000 a year from his IRA will be in the second-highest (33%) income tax bracket and will pay income taxes of ~$40,000.

  • LarryGross

    yes - and there are numerous ways to contribute to an IRA - and a ROTH. The govt does put a limit on how much you can set aside just as they also put limits on how much you can claim for health care deductions or for that matter charitable deductions, business loss carryover, etc, etc, etc.

    but no changes can happen just because one POTUS advocates it - overtly or in cases now days "conspiratorially". At the end of the day - a majority of both houses of Congress have to agree before it ever gets to the POTUS for a signature.

    which if you think about it - the GOP talks in wide varying language about how the code should be "reformed" but almost never in specifics and never as part of a budget.

    in other words, it's just talk.... meanwhile back at the right wing ranch... the conspiracy folks have cranked up the propaganda machine to blather on and on about what Obama will do .....ostensibly all by his lonesome self....

  • randian

    Sounding the alarm for Obama's agenda is "propaganda"? Doesn't matter that he can't unilaterally implement it, the mere fact that he proposed it is scary.

  • LarryGross

    if he had ACTUALLY made such a proposal in the first place, it would stand no chance in the Congress anyhow so what is all of this really about? It's just right wing anti-Obama blather.

    I'm not defending him or his proposals but the blather is so lame it's comical.

  • http://devilish-details.blogspot.com/ mesaeconoguy

    Heya Lar, welcome back!

    How was Dear Leader’s reeducation camp? Not so cheerful? Oh well.

    Geez Lar, we thought you were dead, more than usual anyway.

    Nice comment, but government killing 401k tax preference and seizing/steering assets to “guaranteed retirement accounts” is not a new idea – it goes back to at least 2008

    http://money.usnews.com/money/blogs/capital-commerce/2008/10/23/would-obama-dems-kill-401k-plans

    This has been around for some time, Larry. We would have thought you would have re-learned that in your re-education camp.

  • http://devilish-details.blogspot.com/ mesaeconoguy

    Larry, as I stated before, this is not a new idea, and not exclusively Obama’s (it is a socialist idea of the Dumbasscrapic party – Forward Soviet)

    http://money.usnews.com/money/blogs/capital-commerce/2008/10/23/would-obama-dems-kill-401k-plans

    Lar, there are very few people on the planet dumber than you, and most of them are children, and have an excuse.

  • http://devilish-details.blogspot.com/ mesaeconoguy

    Bingo. Buffett is the biggest crony out there.

  • http://devilish-details.blogspot.com/ mesaeconoguy

    It's not peanuts if they can control all the assets, which is their goal.

    This is scary shit. The end game is 1) eliminate tax havens 2) use technology to track offenders globally ("those without connections") 3) seizure or full control of retirement assets 4) doling out retirement funds directly to "recipients," (savers whose assets have been seized, i.e. you, me) creating 5) total government dependence & reliance.

    It'll take a while to get there, but that's the roadmap.

  • LarryGross

    hey Mesofool - what did folks do BEFORE 401Ks were around? Was that a Dem plot also?

    ;-)

    oh... did you see the author of your "reference"? what a guy!

    oh.. and WHO was POTUS when 401Ks were first created? Was it one of those nasty Democrats that signed it into law?

  • http://devilish-details.blogspot.com/ mesaeconoguy

    Yep, nailed it.

    I'm beginning to do those things as well, and it's not too late to get into physical assets, including PMs.

    They'll come after those too eventually. Molon labe.

  • http://devilish-details.blogspot.com/ mesaeconoguy

    Those were called pensions Lar. Pensions. Now unsustainable pensions, Lar.

    Did they put you on Valium again?

    Thought you'd like that author - my chuckle to you for today.

  • LarryGross

    hey what do ya'll have to worry about.. The GOP is going to be back in charge soon and will put the kabash on that and Obamacare and entitlements, etc, right?

    oh wait... the GOP is in on it also if you are a "real" conspiracy guy, right?

  • http://devilish-details.blogspot.com/ mesaeconoguy

    Larry, I think they may have removed the last part of your brain with miniscule intelligence left.

    Shame.

    Lar, the GOP couldn't win a student council election, especially with a brain-dead electorate like you running around.

  • LarryGross

    pensions? you mean saving money without govt tax benefits? holy smoly....

    that don't sound right... cause that means the govt couldn't take it away if they didn't
    give the benefits to start with eh?

    oh wait.. that would really crap up the conspiracy theory, eh?

  • LarryGross

    the GOP can't win? holy smokes? why not? if everyone thinks like you they should be a shoo in... GAWD o'mighty.

  • http://devilish-details.blogspot.com/ mesaeconoguy

    Lar, what're you going to do with your "guaranteed retirement account?"

  • http://devilish-details.blogspot.com/ mesaeconoguy

    You mean government hijacking retirement savings?

    Geez Lar, you’d better be careful - you could wind up like Luca Brasi.

  • LarryGross

    which one?

  • http://devilish-details.blogspot.com/ mesaeconoguy

    The only one you'll have.

  • LarryGross

    you'll have to catch me up on what conspiracy you're onto now....

  • http://devilish-details.blogspot.com/ mesaeconoguy

    You're really quite dense.

  • LarryGross

    thank you.

  • http://devilish-details.blogspot.com/ mesaeconoguy

    They will seize and/or tax everything they can get their hands on, directly or indirectly.

    This is not a drill.

    If you believe they will not suddenly "amend" the Roth IRA to be taxable, you are being dangerously naive.

  • LarryGross

    they? what are you boys drinking now?

  • http://devilish-details.blogspot.com/ mesaeconoguy

    Correct.

  • http://www.facebook.com/matthew.slyfield Matthew Slyfield

    Ouch

  • Joe_Da

    I am speaking from memory, but the US did have short lived excise tax on accumulations in 401ks and IRA's in excess of $1m (or there abouts). The excise tax was passed as part of either the 87 tax act or the 89 tax act and was repealed after only a couple of years. Since IRA's had only been around about 15 years at that time, 401k even less, it was extremely rare to have that much in an IRA. I only had one client that was bumping up on that threshold so we had to do a little tax planning to avoid the tax. My apologies for not remembering any more of the details of the statute but it was more than 20 years ago and did not last long in the statute.

  • LarryGross

    three are 410K, IRA and Roth and there are variants and all of them are relatively young in how long they have been around and all do change - on things, for instance, how much you can put aside, etc.

    if you take a withdrawal early , you can get whacked big time also.

    I think what most folks do not understand is HOW these changes are made, sometimes seemingly almost in stealth mode via obscure wording inserted in seemingly unrelated legislation and then suddenly "discovered" once the law passes. This leads many to not trust how govt "works" and to suspect even worse changes to sneak through.

    what legislators count on is that no one issue will cause a majority in their district to oust them.

    the thing is - this kind of thing has been going on a long, long time - that's essentially how IRA and ROTHs got created in the first place. There was no huge majority of people demanding their creation in the tax code...they just "snuck" in.

    but now days... people are starting to "notice" more and believe that these backroom things are 'new'.

  • marque2

    Don't get the point of your post. But that is OK. Just note that you forgot the relatively new Roth 401K in your discussion above.

  • marque2

    Actually this is the way it works. Dumb idea get proposed, knowing full well it will get shot down the first time. then it gets proposed again and shot down, but this time the press picks up on the virtues and we get eggheads telling us how fair it is, and progressives telling us how those rich are stealing from the rest of us with those million dollar IRA's, and then the idea slips into the low information voter's brains - yeah lets stick to those rich again. And then it becomes law.

    Proposed today - serious issue in 5 years, law in 10.

    This is why the NRA is so adamant about not letting any legislative changes for guns go through. They know about the incrementalism of the left, and are the only group smart enough to counter it. Most other right wing groups have lost, because they just wanted to be nice and compromise.

  • marque2

    This is part of the reason some folks are hip on the national sales tax idea. Don't get the crazy idea that the government will refund you this tax on your Roth, so we will all end up being taxed twice.

    National sales tax is also evil and should be opposed. Note how small 3% national sales taxes in Europe have ballooned to 20% on top of the already high income taxes.

  • marque2

    Yes the rich will eventually become the meek who shall inherit the earth.

  • marque2

    It is already happening in Australia. They had Roth like accounts, and just this week the Australian government announced a 15% exit tax on the accounts. So now the accounts are being taxed twice when the promise was that they would only be taxed once. And it is only 15% now - but look in 5 years as revenue "needs" grow to go all the way up to personal income levels.

  • marque2

    Too many people think like you, and think there is a gigantic pool of free money (which really doesn't exist) to be had from the rich so the middle class and poor can get free iPhones.

    In the end when the whole system collapses, and we end up under something akin Sharia law, since there will be a few GOP types left, whispering, for fear of being killed, that see we were right after all.

    but by then it will all be too late. All the liberties even the progressives have fought for will be gone, all the money will be gone. It could happen sooner than most progressives think.

  • marque2

    There are now Roth IRA's and Roth 401K's where the money was suppose to come out not taxable. Government tricked us into converting to ROTH over the last two years too. That greatly boosted our tax rates as the increase in income killed many of the other deductions we would normally get. (EG you may be 25% tax rate, but after 110K they start phasing out child tax credit, student loan credit, etc, which makes the real tax much higher. )