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Is that D.C.; no wait.......It was Rome, the fire and the fiddle player, eh?
Geez, they just keep thinking and thinking. I'm sure there is a plan in the works for a rounder wheel, too. Anyway, a short article about fiddling with the tax status of 401k type plans.
"On April 17, however, Republicans and Democrats on the Ways and Means Committee expressed support for retirement savings incentives that would allow workers to put money into 401(k) and individual retirement accounts on a tax-free basis...The continuation of such special treatment would come at a price, though."
Do you think "tax-free" is correct or did they mean "tax deferred"? Even Roth IRA are not tax free.
I believe the author meant tax deferred.
The present deferred tax structure allows the government to collect taxes on the 401-k contribution at a later point in time. Taxes are collected not only on the contribution but on the growth of the investment as well.
In the meantime, these trillions of 401-k/403b investment dollars provide the investment industry with a cash cow that generate billions of dollars fees and insurance premiums. Also some of these profits make their way back to Washington as a way of thanking the Senators by providing funding for politician re-election campaigns and other special projects.
This arrangement is one of the best example of disbursed costs and concentrated benefits. Guess who is paying the fiddle player to play?
Hey there bee... from a little further down in that:
"Witnesses testified that the calculation of the tax expenditure for retirement savings is skewed because the incentives are tax deferrals and not permanent tax exclusions. Retirees would pay what they owed the government when they took distributions.
"Every single dollar exempt from tax now will be subject to tax in the future," said Judy Miller, chief of actuarial issues and director of retirement policy at the American Society of Pension Professionals and Actuaries. She also sought to puncture the criticism that retirement tax incentives are used disproportionately by the wealthy."
Exactly...it's correctly worded in these paragraphs that you referenced.
I think sometimes people get the vocabulary wrong...tax free is very different from tax deferred. I can be the biggest culprit when it come to vocabulary. Trying to reform myself and anyone else who cares...I love the "edit" feature on MFO for this very reason. Thanks.
Well, in my opinion, the need for tax deferral is more important to the boomer wave. Since the withdrawal tax is essentially a income tax on principle and gains, and since the trust fund repayment for SS is a transfer back from the general taxes to the entitlement taxes, boomer deferred savings creates a class of "virtual workers" adding to the revenue for paying the boomer wave. (Note, I think it is a mistake to let people (boomers) recharacterize these by paying taxes that they owe to the future today. There are less deferred savings than was needed so this may be a mute point.)
As far as benefiting the rich goes. Of course it does. It's there and it's was a way, among ways, to reduce taxes. A competent tax expert would do a disservice to their client if they didn't make use of it even if it was unimportant to their client's "retirement". Since Roths are better and more money can be channeled into zero tax on gains, the deferred angle is more attractive, again, in my opinion. (Note, I doubt that this is a substantial amount of money either but I don't kid myself or the other guy that their is always a way to exploit the system.)
Comments
Thanks for this article. From the article:
"On April 17, however, Republicans and Democrats on the Ways and Means Committee expressed support for retirement savings incentives that would allow workers to put money into 401(k) and individual retirement accounts on a tax-free basis...The continuation of such special treatment would come at a price, though."
Do you think "tax-free" is correct or did they mean "tax deferred"? Even Roth IRA are not tax free.
I believe the author meant tax deferred.
The present deferred tax structure allows the government to collect taxes on the 401-k contribution at a later point in time. Taxes are collected not only on the contribution but on the growth of the investment as well.
In the meantime, these trillions of 401-k/403b investment dollars provide the investment industry with a cash cow that generate billions of dollars fees and insurance premiums. Also some of these profits make their way back to Washington as a way of thanking the Senators by providing funding for politician re-election campaigns and other special projects.
This arrangement is one of the best example of disbursed costs and concentrated benefits. Guess who is paying the fiddle player to play?
"Witnesses testified that the calculation of the tax expenditure for retirement savings is skewed because the incentives are tax deferrals and not permanent tax exclusions. Retirees would pay what they owed the government when they took distributions.
"Every single dollar exempt from tax now will be subject to tax in the future," said Judy Miller, chief of actuarial issues and director of retirement policy at the American Society of Pension Professionals and Actuaries. She also sought to puncture the criticism that retirement tax incentives are used disproportionately by the wealthy."
Exactly...it's correctly worded in these paragraphs that you referenced.
I think sometimes people get the vocabulary wrong...tax free is very different from tax deferred. I can be the biggest culprit when it come to vocabulary. Trying to reform myself and anyone else who cares...I love the "edit" feature on MFO for this very reason. Thanks.
As far as benefiting the rich goes. Of course it does. It's there and it's was a way, among ways, to reduce taxes. A competent tax expert would do a disservice to their client if they didn't make use of it even if it was unimportant to their client's "retirement". Since Roths are better and more money can be channeled into zero tax on gains, the deferred angle is more attractive, again, in my opinion. (Note, I doubt that this is a substantial amount of money either but I don't kid myself or the other guy that their is always a way to exploit the system.)