Dems considering taking private accounts.

[Guest guest]

http://www.carolinajournal.com/exclusives/dems-target-private-retirement-accounts.html

Dems Target Private Retirement Accounts

Democratic leaders in the U.S. House discuss confiscating 401(k)s, IRAsBy McMahan

November 04, 2008

RALEIGH  Democrats in the U.S. House have been conducting hearings on proposals to confiscate workers’ personal retirement accounts  including 401(k)s and IRAs  and convert them to accounts managed by the Social Security Administration.Triggered by the financial crisis the past two months, the hearings reportedly were meant to stem losses incurred by many workers and retirees whose 401(k) and IRA balances have been shrinking rapidly.The testimony of Ghilarducci, professor of economic policy analysis at the New School for Social Research in New York, in hearings Oct. 7 drew the most attention and criticism. Testifying for the House Committee on Education and Labor, Ghilarducci proposed that the government eliminate tax breaks for 401(k) and similar retirement accounts, such as IRAs, and confiscate workers’ retirement plan accounts and convert them to universal Guaranteed Retirement Accounts (GRAs) managed by the Social Security Administration.Rep. , D-Calif., chairman of the House Committee on Education and Labor, in prepared remarks for the hearing on “The Impact of the Financial Crisis on Workers’ Retirement Security,†blamed Wall Street for the financial crisis and said his committee will “strengthen and protect Americans’ 401(k)s, pensions, and other retirement plans†and the “Democratic Congress will continue to conduct this much-needed oversight on behalf of the American people.â€ÂCurrently, 401(k) plans allow Americans to invest pretax money and their employers match up to a defined percentage, which not only increases workers’ retirement savings but also reduces their annual income tax. The balances are fully inheritable, subject to income tax, meaning workers pass on their wealth to their heirs, unlike Social Security. Even when they leave an employer and go to one that doesn’t offer a 401(k) or pension, workers can transfer their balances to a qualified IRA.Mandating EqualityGhilarducci’s plan first appeared in a paper for the Economic Policy Institute: Agenda for Shared Prosperity on Nov. 20, 2007, in which she said GRAs will rescue the flawed American retirement income system (www.sharedprosperity.org/bp204/bp204.pdf).The current retirement system, Ghilarducci said, “exacerbates income and wealth inequalities†because tax breaks for voluntary retirement accounts are “skewed to the wealthy because it is easier for them to save, and because they receive bigger tax breaks when they do.â€ÂLauding GRAs as a way to effectively increase retirement savings, Ghilarducci wrote that savings incentives are unequal for rich and poor families because tax deferrals “provide a much larger ‘carrot’ to wealthy families than to middle-class families  and none whatsoever for families too poor to owe taxes.â€ÂGRAs would guarantee a fixed 3 percent annual rate of return, although later in her article Ghilarducci explained that participants would not “earn a 3% real return in perpetuity.†In place of tax breaks workers now receive for contributions and thus a lower tax rate, workers would receive $600 annually from the government, inflation-adjusted. For low-income workers whose annual contributions are less than $600, the government would deposit whatever amount it would take to equal the minimum $600 for all participants.In a radio interview with Kirby Wilbur in Seattle on Oct. 27, 2008, Ghilarducci explained that her proposal doesn’t eliminate the tax breaks, rather, “I’m just rearranging the tax breaks that are available now for 401(k)s and spreading  spreading the wealth.â€ÂAll workers would have 5 percent of their annual pay deducted from their paychecks and deposited to the GRA. They would still be paying Social Security and Medicare taxes, as would the employers. The GRA contribution would be shared equally by the worker and the employee. Employers no longer would be able to write off their contributions. Any capital gains would be taxable year-on-year.Analysts point to another disturbing part of the plan. With a GRA, workers could bequeath only half of their account balances to their heirs, unlike full balances from existing 401(k) and IRA accounts. For workers who die after retiring, they could bequeath just their own contributions plus the interest but minus any benefits received and minus the employer contributions.Another justification for Ghilarducci’s plan is to eliminate investment risk. In her testimony, Ghilarducci said, “humans often lack the foresight, discipline, and investing skills required to sustain a savings plan.†She cited the 2004 HSBC global survey on the Future of Retirement, in which she claimed that “a third of Americans wanted the government to force them to save more for retirement.â€ÂWhat the survey actually reported was that 33 percent of Americans wanted the government to “enforce additional private savings,†a vastly different meaning than mandatory government-run savings. Of the four potential sources of retirement support, which were government, employer, family, and self, the majority of Americans said “self†was the most important contributor, followed by “government.†When broken out by family income, low-income U.S. households said the “government†was the most important retirement support, whereas high-income families ranked “government†last and “self†first (www.hsbc.com/retirement).On Oct. 22, The Wall Street Journal reported that the Argentinean government had seized all private pension and retirement accounts to fund government programs and to address a ballooning deficit. Fearing an economic collapse, foreign investors quickly pulled out, forcing the Argentinean stock market to shut down several times. More than 10 years ago, nationalization of private savings sent Argentina’s economy into a long-term downward spiral.Income and Wealth RedistributionThe majority of witness testimony during recent hearings before the House Committee on Education and Labor showed that congressional Democrats intend to address income and wealth inequality through redistribution.On July 31, 2008, Greenstein, executive director of the Center on Budget and Policy Priorities, testified before the subcommittee on workforce protections that “from the standpoint of equal treatment of people with different incomes, there is a fundamental flaw†in tax code incentives because they are “provided in the form of deductions, exemptions, and exclusions rather than in the form of refundable tax credits.â€ÂEven people who don’t pay taxes should get money from the government, paid for by higher-income Americans, he said. “There is no obvious reason why lower-income taxpayers or people who do not file income taxes should get smaller incentives (or no tax incentives at all),†Greenstein said.“Moving to refundable tax credits for promoting socially worthwhile activities would be an important step toward enhancing progressivity in the tax code in a way that would improve economic efficiency and performance at the same time,†Greenstein said, and “reducing barriers to labor organizing, preserving the real value of the minimum wage, and the other workforce security concerns . . . would contribute to an economy with less glaring and sharply widening inequality.â€ÂWhen asked whether committee members seriously were considering Ghilarducci’s proposal for GSAs, Albright, press secretary for the Committee on Education and Labor, said and other members were listening to all ideas.’s biggest priority has been on legislation aimed at greater transparency in 401(k)s and other retirement plan administration, specifically regarding fees, Albright said, and he sent a link to a Fox News interview of on Oct. 24, 2008, to show that the congressman had not made a decision.After repeated questions asked by Neil Cavuto of Fox News, said he would not be in favor of “killing the 401(k)†or of “killing the tax advantages for 401(k)s.â€ÂArguing against liberal prescriptions, Beach, director of the Center for Data Analysis at the Heritage Foundation, testified on Oct. 24 that the “roots of the current crisis are firmly planted in public policy mistakes†by the Federal Reserve and Congress. He cautioned Congress against raising taxes, increasing burdensome regulations, or withdrawing from international product or capital markets. “Congress can ill afford to repeat the awesome errors of its predecessor in the early days of the Great Depression,†Beach said.Instead, Beach said, Congress could best address the financial crisis by making the tax reductions of 2001 and 2003 permanent, stopping dependence on demand-side stimulus, lowering the corporate profits tax, and reducing or eliminating taxes on capital gains and dividends.Testifying before the same committee in early October, Jerry Bramlett, president and CEO of BenefitStreet, Inc., an independent 401(k) plan administrator, said one of the best ways to ensure retirement security would be to have the U.S. Department of Labor develop educational materials for workers so they could make better investment decisions, not exchange equity investments in retirement accounts for Treasury bills, as proposed in the GSAs.Should Sen. Barack Obama win the presidency, congressional Democrats might have stronger support for their “spreading the wealth†agenda. On Oct. 27, the American Thinker posted a video of an interview with Obama on public radio station WBEZ-FM from 2001.In the interview, Obama said, “The Supreme Court never ventured into the issues of redistribution of wealth, and of more basic issues such as political and economic justice in society.†The Constitution says only what “the states can’t do to you. Says what the Federal government can’t do to you,†and Obama added that the Warren Court wasn’t that radical.Although in 2001 Obama said he was not “optimistic about bringing major redistributive change through the courts,†as president, he would likely have the opportunity to appoint one or more Supreme Court justices.“The real tragedy of the civil rights movement was, um, because the civil rights movement became so court focused that I think there was a tendency to lose track of the political and community organizing and activities on the ground that are able to put together the actual coalition of powers through which you bring about redistributive change,†Obama said. McMahan is a contributing editor of Carolina Journal. Feeling the pinch at the grocery store? Make dinner for $10 or less.

[Guest guest]

Its goes deeper than that. The article says that the proposed plan would have accounts that would be taxed every year based on capital gains. So it would be like paying for Social Security, but paying taxes on it.

So this is how the new retirement plan would work.

You and your employer would be taxed 5% of your income to pay into this new account, which would be subject to capital gains taxes.

You would still have to pay Social Security and Medicare taxes on top of that. At current rates that would mean something between 10% and 15% of your income would be gone to these tax schemes BEFORE you even paid income tax.

This really is just a scam. The whole idea ISN"T to help people retire, but the generate a captive stream of taxable income for the government. Also, since the government owns the account, you can't leave it as inheritance, thus making it much harder to put aside anything to help you kids get ahead, which is also part of the plan. It will essentially drag the common people down into subservience and government dependence.

In a message dated 4/1/2009 3:41:58 P.M. Eastern Daylight Time, no_reply writes:

This comes of people neing too stupid to save and invest properly. If you are a Democrat and voted for Democrats, remember that you just may have voted most of your retirements away, and you may have cut your children's inheritance by half. Feeling the pinch at the grocery store? Make dinner for $10 or less.

[Guest guest]

The article was first published on November, so I don't think it is a joke.

The Republicans have just come out with a plan that does like you say. It has something like a 5% or 10% tax one people earning less than $50k and a 25% tax on those making over $100K. Few exemptions, and it could be filled out on an index card. Makes a lot of sense to me. Heck, it even sounds like something I mentioned not too long ago.

It would be a good idea though, the Republican idea that is. I would add one caveat though. I would add a special "debt tax" that would be tacked on each year to help pay down the debt. This would be a percentage added on to this base rate. For example: a person paying 5% tax might find themselves paying an extra 5% to cover the debt of government. Talk about making people aware of the cost of government, there you go.

In a message dated 4/1/2009 6:22:21 P.M. Eastern Daylight Time, no_reply writes:

Or maybe the opposite would happen. Given the stupidity of most people I'd say the opposite would happen.Administrator Feeling the pinch at the grocery store? Make dinner for $10 or less.

[Guest guest]

" Democratic leaders in the U.S. House discuss confiscating 401(k)s, IRAs "

This comes of people neing too stupid to save and invest properly. If you are a

Democrat and voted for Democrats, remember that you just may have voted most of

your retirements away, and you may have cut your children's inheritance by half.

Congratulations.

Are you pleased with yourselves?

Administrator

[Guest guest]

" This really is just a scam. The whole idea ISN " T to help people retire, but the

generate a captive stream of taxable income for the government. Also, since the

government owns the account, you can't leave it as inheritance, thus making it

much harder to put aside anything to help you kids get ahead, which is also part

of the plan. It will essentially drag the common people down into subservience

and government dependence. "

let's hope this is an April Fools Day joke. I suspect a revision of the tax code

will be next. It will be simplified...so that most loopholes are closed and

credits are ended.

Personally, I am for a flat tax with NO credits for anyone except retirees and

retired military personnel. That way, everyone in the country would be faced

with the same choices;

1) How many kids can I afford?

2) How many cars and luxury items?

3) How big a house?

4) How much do i have to budget to live?

Etc.

The result would be a drop in population growth, and a further shrikage of the

economy, but people would learn to be more self sufficient, and we would wind up

with fewer people racking up huge debts as they have.

Or maybe the opposite would happen. Given the stupidity of most people I'd say

the opposite would happen.

Administrator