October 21, 2017 at 8:58 pm #2959
Republicans “have to pass” tax reform, including business tax cuts. They’re running into a few problems, so now they’re talking about capping contributions to 401K plans for “working Americans”…Only, they’ll wait to announce the actual cap until after 2018 … but build it into their anticipated revenue stream. On top of a 30 day $1.5 Trillion in budget cuts, without any Democratic votes, this should be the cherry on top of the cake.
Is anyone out there watching this dangerous charade?
October 22, 2017 at 1:58 am #2962
1. The bill is a dangerous scam. It is not small-c conservative to open such a hole in the budget.
2. After much consideration, I do not like tax deductions to do societal nudging of norms. For anyone below the top quintile of Americans by income, the utility drops dramatically. That’s not enough people to change our culture to be more savings-oriented.
If we want to get people to save, a default set-aside and something like this is much better: http://fortune.com/2016/03/29/universal-401k-california/.
I often feel the top quintile of this country constructs a hodgepodge of grotesquely advantageous norms to use as an unearned advantage against the bottom 80%. Of course you have your 529, your 401K, your IRA, all invested in low-fee funds. Oh, what do you mean you didn’t know to do that at 18 or 22?
- This reply was modified 3 weeks, 6 days ago by Daniel Farina.
October 22, 2017 at 12:25 pm #2967
Isn’t this the same universal IRA concept that Obama created that Republicans struck down? I think it is wonderful that CA may still offer this, but isn’t this really the perfect instrument for working class people to help them save? Who lobbied to remove this option for working class people? Bankers? Investment houses? They say to “follow the $$” to find the truth…what is the truth behind elimination of this program?
October 23, 2017 at 7:27 pm #2974
Yeah, it an Obama outgrowth, much like the Fiduciary Rule changes, which I welcome wholeheartedly.
The obvious opposition are the incumbents of high-fee services: full service brokers, active funds, and the like. Surely Vanguard, which has a focus on low fees and is likely to pick up business, would be delighted. State Street, Blackrock, Schwab, and Fidelity also have low-fee products in this area, though who knows how hard they want to push them when lobbying.
But what of Edward Jones, John Hancock, Ameriprise, and of course the legion of active funds? They would surely oppose all those changes. Once the government makes it an expectation (e.g. fiduciary rule) that you should not pay meaningful fees to hold money or trade, what will they do?
I suspect there is also as sociological component, or at least excuse, that somehow, the savvy to save in such instruments is an earned wisdom that separates the virtuous from the feckless. Obviously, I think that is nonsense. There should be good defaults. The tax code shouldn’t be a coupon clipping game for the upper middle class and a game of chess for the truly wealthy.
- This reply was modified 3 weeks, 5 days ago by Daniel Farina.
October 22, 2017 at 10:32 am #2965
I’m a little ambivalent about 401K programs as social policy. From a societal viewpoint when you retire you won’t be living off your savings, you’ll be living off the productivity of people still working. (You’ll be eating food that current workers produce, living in houses they build and maintain, staying warm with energy they generate, and getting medical care they provide. As with Social Security, this is just the way the world works.) Of course, on an individual basis you’ll be better off in retirement if you have a million or two socked away. I highly recommend it. But from a societal viewpoint, our policymakers should be promoting things that will enable those future workers to be more productive and efficient. Tax cuts for rich people are probably the worst thing they could do in that direction.
October 22, 2017 at 12:20 pm #2966
Sophisticated investors and corporate employees understand that you use the tools you have to save in the most tax-advantageous way possible. The IRA was the first investment concept I can recall other than savings accounts, direct investments in property or the market, that was launched by legislative fiat. Gradually, the amount grew as incentive to save (and no doubt, encouraged by investment firms). This morphed into a host of other savings vehicles through tax law and the now 401K, all intended to promote savings. Until now. Republicans see another revenue stream to tap. They are going to get some serious push-back on this, not because the 401K is a perfect investment instrument, but because they keep moving the deck chairs to justify tax cuts for the people who need 401K options the least.
It is deeply wrong.
- This reply was modified 3 weeks, 6 days ago by mary guercio.
October 22, 2017 at 1:14 pm #2969
I read this this morning and it neatly sums up where things stand with the GOP base.
“Many Republican voters have, at least for now, jettisoned traditional conservatism in favor of the Trump-Bannon brand of ethnonationalism. They have turned inward instead of outward, they have embraced white identity politics as a matter of course and they have developed a disdain for the hard, intricate work of governing. … There is a nihilistic strain coursing through the veins of a significant number of people on the American right. They delight in Mr. Trump’s effort to annihilate truth and peddle conspiracy theories, and they draw energy and purpose from the unsettling effect he has on the nation as a whole.”
Is it any wonder that the Republicans are confident they will be able to pass this tax cut with impunity that will impact people within their base?
You must be logged in to reply to this topic.