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AlbertJayNock

Democrats and 401Ks

Democratic House members Jim McDermott and George Miller are considering doing away with tax breaks on 401Ks.  This is incredible.
I've read literature on retirement planning, and in addressing the possibility of tax breaks on 401K's and IRA's going away, the answer is usually something like "don't worry, that's politically impossible."

Apparently not.

McDermott and Miller are considering the proposal by Notre Dame economics professor Teresa Ghilarducci to replace the 401K with a refundable tax credit of $600 along with a worker contribution of 5% of income. She proposes this be paid for by "most of the tax breaks for 401(k)s and IRAs". (Emphasis mine). The IRA part of her statement is not mentioned in any of the news articles I've read on this, admittedly because the McDermott and Miller haven't proposed getting rid of those tax breaks. Yet.

When I first saw articles on the proposed 401K changes, I was shocked at the sweeping nature of the changes proposed. But considering the possibility that taxing IRA's is yet to come,  maybe they are actually incremental.

Wow.

Comments

I'm confused. Doesn't that kind of defeat the entire purpose of the specially designed IRA/401k packages?
You're not confused. It does defeat the purpose.

But it gets more tax revenues now. (As opposed to the deferred taxes it will get later.)