Feds' sights set on our 401(k)s
By Jack Markowitz
Published: Thursday, April 18, 2013, 12:01 a.m.
Smokers, get ready to cough up more.
And if you're hooked on the saving habit, you'll at least be discouraged from overdoing it.
That's if President Obama's budget for next year passes. Let's hope Congress finds and kills some of the worst ideas in a document that approaches 2,500 pages. Two real duds stick out.
One is a near-doubling of the federal tax on cigarettes; the other, a virtual “cap” on 401(k) retirement plans. If you reach $3 million in 401(k) assets, you might as well stop there. Putting more money in wouldn't be tax deductible.
Both are bad public policies, but the slap to smokers might be worse. It hits the more vulnerable people.
Federal tax on a package of 20 cigarettes is already $1.01 (vs. 39 cents when the president took office). The fiscal 2014 budget would raise the federal grab by 94 cents to $1.95. (Not even to mention state taxes, manufacturing, retail and other pieces of the action.)
Millions have, of course, stopped smoking. But they tend to be middle- and upper-income folks, more cued in to health warnings.
Who's left? The poor, mainly. Also, teenagers acting out the foolishness of their years. And hard-core addicts, the yellow-fingered set that “can't quit.” Government, which cannot curb its own addiction to spending every form of money, taxed, borrowed, and printed, is very severe with other sorts of human weakness. It banishes smokers from their desks, eating places, theaters and public transportation. For a nicotine fix, the outcasts must shiver beyond the doors of office buildings.
True, there's a theory that hyper-taxed cigarettes will be the last straw. Everybody will quit and live longer. But chances are, millions will stay hooked and pay more. A total of $7, $8 and more per pack can easily reach $2,500 a year. In a better world, we'd all invest so much.
But Uncle Sam as tax collector shows no mercy. The craving for revenue is paramount. And smokers have no friends, no lobby. They are sitting ducks.
Not so, it's hoped, are the savers.
The 401(k) plan is a stake in the future for workers who don't have a pension plan or who hope to supplement it. A part of their wages can be put aside long-term. They enjoy an immediate saving on current income taxes. Their employer might even throw in a matching amount. Eventually, in retirement, income tax is indeed paid as the “personal pension plan” distributes benefits. It's a fair deal all around.
But now comes Mr. Obama's budget team.
They've figured out that $3 million in 401(k) assets in 2013 should yield $205,000 yearly — “substantially more than is needed to fund reasonable levels of retirement saving,” according to an official explanation. Therefore a tax deduction for anything more would be just a “loophole” for the rich.
Never mind how the Federal Reserve might be inflating future dollars away. Or all the investment benefits to the economy. And the social benefits to families that flow from saving as much of their own money (and needing correspondingly fewer “entitlements”) as they can.
Another thing. When will the $3 million limit become $2 million or $1 million if government decides what's “reasonable?” The 401(k) is in the cross hairs. We're warned.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Kovacevic: A great day to appreciate No. 68
- Steelers safety Polamalu finds himself in tough position
- LeBeau wants to come back as Steelers defensive coordinator
- ProStart primes student chefs for best kitchen jobs
- Early data reveal downward shift in holiday spending
- Osmonds bring a spirited mix of music to Consol show
- Economic recovery hinges on feds, experts say
- Power play, penalty kill help put Penguins on another 100-point pace
- Obama administration asking insurers to be flexible on health coverage
- Armstrong beats Chartiers Valley for 6th straight win
- Water authority signs off on DEP sanction