Taxes

House Republicans Consider Taxing Retirement Savings

JM Ashby
Written by JM Ashby

Congressional Republicans are scraping the bottom of the barrel to find ways to pay for their package of tax cuts for the rich and, to that end, they're considering taxing retirement savings.

According to the Wall Street Journal, House Republicans may place a cap on contributions to 401(k) plans.

One idea is to limit the amount of pretax money households can sock away for retirement saving. [...]

Lobbyists and others in the retirement and financial services industries who have spoken to congressional staff and committee members say lawmakers are looking at proposals that would allow 401(k) participants to contribute significantly less than what is currently allowed in a traditional tax-deferred 401(k). An often mentioned amount is $2,400 a year. It isn’t clear whether that would only apply to 401(k)s or IRAs or both.

As you know, Republicans also intend to eliminate the estate tax and that makes this especially grotesque. Rich families with estates worth more than $11 million don't need 401(k) plans.

What this and all the other GOP proposals have in common is that none of it would cover the cost of their tax cuts for the rich. The GOP could pass every single measure they're considering, from taxing retirement savings to eliminating state and local tax deductions, and it still wouldn't cover the gargantuan cost of $5 trillion in tax cuts.

You could add all the spending cuts they're considering together and that also wouldn't cover the cost of their tax cuts.

You could add all of the spending cuts and the tax hikes for the middle class together (about $3 trillion) and that still wouldn't cover the cost of $5 trillion in tax cuts for the rich. Republicans believe the other $2 trillion will be collected from the crumbs that trickle down into Oliver Twist's empty bowl.

  • Badgerite

    Let me get this straight. They are proposing to give a “historic tax break” to the families of deceased people passing on an estate of over 11 million dollars to their heirs but they are going to do this by a “historic” tax on everyone else’s 401K retirement savings. Wow. MAGA.

  • RVincent

    Breaking my heart here….. I pay a 9% effective income tax rate making 200,000… You know why it’s so low? Both me and my wife contribute the max… 48K (0ver 50). Hey, I loved it all these year but deep down I felt like it didn’t make sense…. How the hell are folks like us paying an effective 9% rate on income like this? It’s a tax shelter so, again, don go breaking my heart with your sob stories..k I will just pay the tax and contribute to a ROTH 401K…. No problem..

    • Badgerite

      The overwhelming majority of people who take advantage of that particular deduction put in place to prompt Americans to save for retirement, do not make 200,000. Now if they would like to exempt people making your kind of income, I would be on board with that but that would not result in much revenue to fund their “historic” tax cut for the exceedingly wealthy as most Americans make well below that and those would be the Americans that they would be taking from in order for an estate of over 11 million dollars to be passed on to heirs tax free. And such.

  • Badgerite

    Surprise me. They will run this country’s economy into the ground again. And leave the next generation with an debt that will have purchased nothing.

  • Yep. let’s take away money for your retirement, but not when you’re dead (and it no longer can help you).

    Assholes.

    • Scopedog

      “Assholes”.

      The GOP is filled to bursting with them, and yet the media keeps bleating out the “both sides!!” line.

  • Draxiar

    I hope Democrats frame this as “Retirement Tax”.

    • Christopher Foxx

      The would require the Democrats to actually have a game plan and the stamina to carry it out.

  • KanaW

    I used to despise them. Now I’m starting to actively hate them. They have no empathy, no kindness, no fellow-feeling. They are inhuman.

  • Aynwrong

    Wow! Just wow (Sorry, that’s all I got).

  • Dread_Pirate_Mathius

    This is another tax hike aimed squarely at my income bracket. (see also: ending the SALT exemption).

    The 401k exemption for 18k / yr is HUGE for me and I am deeply dependent on it for retirement savings. For the rich-rich, it is insignificant. For the poor and middle class, they don’t have enough to contribute anyway, so it’s irrelevant.

    So who is this a tax hike on, really? Those of us in the top 5% and below 1%.

    Once again, the Republicans are going after the deepest pockets that aren’t part of the donor class – and that’s mine.

    As before, I have no objection to paying more in taxes. That is my obligation as a member of a civilized society. But to cut taxes on the rich while raising mine is grotesque.

    ——-

    Simple version: Red Shirts believe everyone should be taxed to poverty unless they have enough money donate.

    • ninjaf

      Pretty much hit the nail on the head.