George Miller. Some Democrats are starting to target the tax subsidies for 401(k)s and other private retirement options. Mr. Miller, who heads the House Education and Labor Committee, calls them "a big failure" and recently held a hearing to ponder alternatives, including nationalizing pensions and replacing them with special bonds administered by Social Security. The proposal has also caught the eye of Jim McDermott, who chairs the relevant Ways and Means subcommittee. Mr. Obama won big with his promise of tax cuts for the middle class, which doesn't square with attacks on middle-class nest eggs.
It seems they had a hearing last month, and part of the strategy sounds like this:
So now, instead of my 401(k) funding investment business at my discretion, is in fact going to fund more government expansion, because instead of buying stocks or bonds, I'm going to buy treasury certificates which pay a whopping 3%.House Democrats Contemplate Abolishing 401(k) Tax BreaksPowerful House Democrats are eyeing proposals to overhaul the nation’s $3 trillion 401(k) system, including the elimination of most of the $80 billion in annual tax breaks that 401(k) investors receive.
House Education and Labor Committee Chairman George Miller, D-California, and Rep. Jim McDermott, D-Washington, chairman of the House Ways and Means Committee’s Subcommittee on Income Security and Family Support, are looking at redirecting those tax breaks to a new system of guaranteed retirement accounts to which all workers would be obliged to contribute.
A plan by Teresa Ghilarducci, professor of economic-policy analysis at the New School for Social Research in New York, contains elements that are being considered. She testified last week before Miller’s Education and Labor Committee on her proposal.
At that hearing, the director of the Congressional Budget Office, Peter Orszag, testified that some $2 trillion in retirement savings has been lost over the past 15 months.
Under Ghilarducci’s plan, all workers would receive a $600 annual inflation-adjusted subsidy from the U.S. government but would be required to invest 5 percent of their pay into a guaranteed retirement account administered by the Social Security Administration. The money in turn would be invested in special government bonds that would pay 3 percent a year, adjusted for inflation.
The current system of providing tax breaks on 401(k) contributions and earnings would be eliminated.
“I want to stop the federal subsidy of 401(k)s,” Ghilarducci said in an interview. “401(k)s can continue to exist, but they won’t have the benefit of the subsidy of the tax break.”
Under the current 401(k) system, investors are charged relatively high retail fees, Ghilarducci said.
“I want to spend our nation’s dollar for retirement security better. Everybody would now be covered” if the plan were adopted, Ghilarducci said.
She has been in contact with Miller and McDermott about her plan, and they are interested in pursuing it, she said.
“This [plan] certainly is intriguing,” said Mike DeCesare, press secretary for McDermott.
“That is part of the discussion,” he said.
While Miller stopped short of calling for Ghilarducci’s plan at the hearing last week, he was clearly against continuing tax breaks as they currently exist.
I'm telling ya, it's all about control.