Feds eye retirement-fund tax to cut $16 trillion-plus deficit
Uncle Sam, in a desperate attempt to fix its $16 trillion-plus deficit, is leering over Americans’ retirement nest egg as its new bailout fund.
Capitol Hill politicians are assessing tax changes that could let the Internal Revenue Service lay claim to a portion of the $18 trillion sitting in 401(k) accounts and other tax breaks used by middle-class workers, including cutting the mortgage tax deduction.
A commission looking for ways to close the deficit, and, noting the extent of 401(k) tax breaks, recommends an examination of the system as one way to prevent government bankruptcy.
“Unlike the current system,” Gale told Congress, “workers’ and firms’ contributions to employer-based 401(k) accounts would no longer be excluded from income and would be subject to taxation, contributions to IRAs would no longer be tax-deductible and any contributions to a 401(k) plan would be treated as taxable income.”
In other words, the employee and employer would no longer get a deduction under the Gale plan, they would qualify for a credit. And the credit would “increase [government] revenues by about $458 billion,” Gale says.
Testifying before the House Ways and Means Committee about the proposals, Randolf Hardock, of ABC’s board of directors, said, “[The idea] could seriously undermine the retirement savings system.”
Jack VanDerhei, research director of Employee Benefit Research Institute (EBRI), believes either of the two proposed 401(k) changes under review would have a “catastrophic” effect on the current retirement saving system.