January 23, 2007

Does Joe Klein Want to Abolish Your 401(k)?

Carroll Andrew Morse

In a blog-post mostly about health care reform that includes some brief commentary on what President Bush will propose during tonight’s State of the Union address, Time magazine columnist Joe Klein drops this major bomb…

[President Bush’s] plan opens the door for a real negotiation on changing the current tax code in a more progressive way, which is to say: all benefits received from employers should be included in salary totals.
Of course, a common benefit provided by employers not presently counted towards an individual’s taxable salary total is contributions made to a 401(k) retirement account. Has Joe Klein just telegraphed that eliminating the tax-free status of 401(k)'s has become part of the left’s agenda to make the tax code more “progressive”? If not, then what else of significance could he be talking about?

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The media so far has said so in the context of including employer-provided health insurance as part of taxable income.

I would not be surprised to see 401(k) "matches" included - if not now, in the future - or "means tested" so that only lower-middle class and below get to take advantage of them (essentially they've already done this with IRA's).

What few realize is what a good deal IRA's / 401(k)'s are for the government. The gov't ALSO gets to take advantage of the savings / compounding of interest, for once withdrawn the "saver" will be hit with ordinary income tax rates. Financial planners like to "sell" these on the assumption that "you'll be in a lower tax bracket when you retire." I WOULD NOT COUNT ON THIS!

So, will 401(k) contribution be taxed be taxed going in, and taxed again when withdrawn? Likely.

Think this is unfair or inconceivable? Right now you pay income taxes on your "FICA" "contribution" to Social Security ... and once retired, above a fairly low threshold, are pay income taxes again on your "Social Security benefit." So many people pay income taxes twice on Social Security, which is a stealth way of reducing the "Social Security benefit" (ultimately, the program is really a welfare program dressed in retirement drag).

The other dirty little secret is that there will never be enough "rich" (or even upper middle class) people to pay for government pensions, universal health care, Social Security and all of the rest of the Democrat utopia.

They have to also tax the sh** out of the middle and lower middle classes. We already see this in RI via high sales and property taxes in addition to our very "progressive" income tax.

The Democrats are selling their utopia on the premise that the "rich," i.e., someone else will pay the tab.

They know it's a lie - but are more concerned with transforming the U.S. from a free country / free market economy into a European style "Democratic Socialist" state. The sycophantic media is a willing accomplice, as is much of the Republican Party (can you say "prescription drug benefit"?).

Posted by: Ragin' Rhode Islander at January 23, 2007 12:34 PM

This makes me think about how Billy Bulger just added $29,000 to his pension by including housing allowance and company car in his “income” calculation?

Maybe Billy “I plead the 5th” Bulger should be paying back taxes on that income.

Posted by: WJF at January 23, 2007 12:48 PM

Are you referring to the past President of the University of Mobsterchusetts? ;-)

Posted by: Ragin' Rhode Islander at January 23, 2007 1:46 PM

And President of the Senate - Word on the street is that Beacon Hill is grateful that Billy won't say where Whitey is. Whitey knows too much!

Posted by: WJF at January 23, 2007 3:19 PM

Ah, the Corrupt Midget. It's nice to be reminded that Rhode Island's bad politicians can be, if not exceeded, at least rivaled.

Posted by: SusanD at January 23, 2007 10:55 PM
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