Messing with the 401K program

401(k) Tax Changes May Be On Fast Track


One of the more controversial and sweeping proposals pitched during the hearing would do away with tax deferrals for for 401(k) plans and IRAs, replacing them with a flat tax credit.

"The purpose of the retirement income system is to promote an adequate retirement, not to promote tax sheltering through 401(k)s," testified William Gale, a co-director of the Urban-Brookings Tax Policy Center at the Brookings Institution.

Not only do the existing tax rules provide less immediate benefit to low- and middle-income households, they are also relatively ineffective at inducing new saving," he says. "Contributions by high-income households to tax-subsidized retirement accounts are more likely to represent funds that are reshuffled from existing savings to take advantage of the tax benefit rather than a net new addition to saving. In other words, the current tax incentives to increase saving have relatively low bang for the buck because they merely subsidize shifting saving for high-income households rather than raising the total amount of saving in the economy."

Comment: 4 pages ... good read. My view ... GIANT mistake to mess with this

1 comment:

  1. One part of the government is trying to spend money to induce people to spend money. Another part is trying to spend money to induce people to save money. Howzabout we shut down both groups and stop borrowing so much money and see what people choose to do of their own free will?

    (I'm glad to be able to comment again, dear brother......dunno what happened, but maybe I'll have a bit to say!)


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