Just how low can the GOP go?
Just when you think the GOP cannot get any lower, we read this:
The 401(k) simply defers taxes, it doesn’t exempt them. According to the Tax Foundation, a nonpartisan think tank, this half-trillion figure “does not represent taxes that will never be paid. Instead, it represents taxes that will be paid at a future time, when individuals retire.”
“The revenue will have to be found in the future,” Olivia Mitchell, a professor at the Wharton School and executive director of the Pension Research Council, told Yahoo Finance. “It’s robbing Peter to pay Paul.” . . .
“It’s essentially an accounting gimmick,” said Mitchell . . . Marc Goldwein also called it a “budgetary gimmick.”
“Roths are a worse deal for the federal government — probably more revenue is lost,” he told Yahoo Finance. “So if anything, switching from traditional tax-deferred plans to Roth IRAs is probably a long-term loss.”
So the GOP wants to move hundreds of billions in future tax revenue (which will be sorely needed due to the retirement of boomers) up to the present, to provide a fig leaf for their incredibly irresponsible plans to balloon the national debt. Wonderful.
They claim they’ll replace 401ks with Roths, but:
A shift to Roths from traditional vehicles may present a further fiscal problem in the future. Mitchell believes that taxes will have to rise in the future, potentially erasing Roths’s tax-free withdrawal.
“With population aging and longer lifetimes we’re not going to be able to keep the promise to have Roths not be taxed in retirement,” she said. “I think it’s going to get more difficult to protect.”
Wait, you mean future governments might not honor their promises? Um, yes:
Politicians from both parties have tried to scale back the 401(k) system. Former President Barack Obama proposed a cap on 401(k) balances of $3.4 million in 2015.
Over at Econlog, I praised Trump for taking a firm stand against any cuts in 401ks. It took only two days for that to be exposed as another one of Trump’s unending series of lies:
After Trump tweeted that “There will be NO change to your 401(k)” on Oct. 23, Trump then told reporters two days later, “Well, maybe it is [on the table], and maybe we’ll use it as negotiating.”
Speaking of lies, the White House informs us that all 16 of the women who accused Trump of sexual harassment are lying. Every last one of them. That’s a relief. For a moment there I was worried that we had a Harvey Weinstein in the White House.
PS. Suppose the Financial Times said, “Ohio State’s come from behind victory over Penn State shows the need for higher interest rates.” How would you react? Scratch your head a bit? Then how do you react to this FT headline:
Billionaire boom is a sign that rates need to rise
Nowhere in the article does the author tell us whether these higher rates are to be generated with an easy money policy (as in the 1960s) or a tight money policy. What scares me the most is that I suspect they don’t even understand the question.
Can we have at least one media outlet that is not clueless about monetary policy? (I suppose the National Review is best.) For the Nth time, interest rates are not a policy; they are the effect of various alternative policies.
HT: Stephen Kirchner
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29. October 2017 at 10:44
Sumner reads about 401(k)/IRA regulations in place for decades.
Still blames trump.
My sides…
29. October 2017 at 10:55
Any and all changes to 401(k) rules require congressional approval.
Sumner believes Trump is going to wear the clothes of all members of Congress?
Still not getting how Trump negotiates (rightly or wrongly). Clueless as clueless can be.
Also, Bill Clinton is a rapist.
29. October 2017 at 10:58
Ex-Apprentice Summer Zervos paid $500,000 by Gloria Allred to accuse Trump.
Sumner is telling us harassment is bad. So edgy!
29. October 2017 at 11:55
Clinton’s lawyers outright lied to The New York Times in saying that they had nothing at all to do with the fake “Russian Dossier” Hillary Clinton was just discovered having paid for – and that led Julian Assange of Wikileaks to tweet-troll “future president” Hillary Clinton with a 2016 repost she had made proclaiming herself to be the next US leader.
Sumner doesn’t touch this of course
29. October 2017 at 11:58
Imagine this blog’s reaction if Trump paid $12M to Russia to make a fake dossier on political opponents after selling them our uranium.
This is how everyone here can know this blog is nothing but a partisan cesspool of left wing propaganda.
29. October 2017 at 13:00
The Manafort indictment (likely tomorrow) has been planned for weeks. They even told him when they raided his house that they were going to indict him. NYT reported it, and Mueller wanted to flip Manafort on Trump. Just a distraction from Uranium One. Look for Assange to retaliate against Mueller.
https://i.imgur.com/sowqIhU.png
29. October 2017 at 13:13
I am in no way in favor of the limits by themselves, but I find the discussion around this 401k idea disingenuous (not on your part, Scott; I’m talking about the articles I’ve seen about it) on at least two fronts:
1. The talk about how people will put less in their 401k without the tax incentive is true (!!), but less relevant than it seems… because a dollar in a Roth 401k (which is supposed to be exempt from future taxes; more on this below) is worth more than a dollar in traditional 401k. So people might save less in nominal terms, but the future consumption value would stay the same (all else equal, again see below).
and, 2. The talk about how Roth accounts are a worse deal for the government is probably wrong, or at least requires actual data to convince me. Here’s why. Theoretically, if taxes are flat and equal over time, there would be no difference in total revenue raised; but of course this is not the case, and progressive marginal rates are the reason why. Even if rates don’t change, as long as your first dollars of AGI are taxed at 0-15%, your average tax rate will be less than the top marginal rate at which you save when you defer in a traditional IRA. (This is effect is magnified if you are able to utilize a “Roth conversion ladder” for several years). So making a bunch of high income people who defer up to $18k a year pay at 39.6% now will generate a decent amount of revenue now, but the future revenue lost will be less.
No, the effect of this policy is a significant tax increase on the high income, a small tax (possibly insignificant) increase on the middle income, and no effect on low income (since if they contribute at all it should be to Roth anyway). This could be more than offset by large enough decreases in other taxes (income and corporate); I will admit I have lost track of the current proposals being floated, so I am agnostic.
But the talk about the Roth being a bad deal for the government has to be wrong. I mean, there is a reason high income people opt for traditional 401k over Roth, because Roth is a bad deal for them. If it’s a bad deal for them and a bad deal for the government, it would be a truly terrible policy. It is not.
Now, the truly scary idea is any talk of taxing Roth distributions already held in accounts. That would be truly awful. It would be analogous to announcing that social security benefits are decreased for current (or near) retirees, which most people see as truly unfair – I might be naive, but I think people would view this the same way.
29. October 2017 at 13:46
Trent, I have nothing against Roth IRAs, but this is just a scam to balloon the deficit without acknowledging what they are doing. It’s a shell game. It’s like Enron accounting.
Remind me why we need “regulators” to protect against private sector fraud.
29. October 2017 at 14:20
Why not the same reason why we’re told we need a central bank to protect against private sector spending?
You know, the belief that people are too stupid to take care of themselves?
29. October 2017 at 14:21
Obama’s Campaign paid $1 MILLION to same law firm that was paid $12 million to funnel money to Crowdstrike and Fusion GPS by DNC and Hillary CLinton.
https://i.imgur.com/u6uZG6W.jpg
29. October 2017 at 16:18
It’s not a coincidence that government careerists want to make it so that people depend more on the government.
29. October 2017 at 16:32
I’ve been reluctant to switch to a Roth 401K because of the risk that the government will renege on the promise not to tax the proceeds again on withdrawal. It seems sensible not to risk giving them another bite at the apple.
29. October 2017 at 16:46
Uh, Sumner, there was audio with Weinstein talking with a woman about how he groped her. There’s no similarly clear evidence with Trump (and no, the Access Hollywood tape isn’t similarly clear, and was almost certainly standard Trump braggadocio).
29. October 2017 at 16:47
But, Scott, my point is that the shells are not of equal size. The assumption is that a traditional and a Roth are functionally equal, and they are not. For people with high incomes, the government gains my forcing them to shift from traditional to Roth. They are taking a smaller shell from the future to take the place of a bigger shell now.
29. October 2017 at 17:53
Trent, Yes, I understand your point. But any difference in tax rates is likely to be a second order effect. The main goal here is to make the deficit look smaller, without actually reducing the deficit.
29. October 2017 at 17:54
Harding, You said:
“almost certainly standard Trump braggadocio”
Wait, you’re saying Trump is a liar? That’s news to me.
29. October 2017 at 19:28
A good post by Scott Sumner, but I think he is too generous by half to the GOP (or the Dems). The GOP is not going any lower, it is where it has long been.
The US does not have a “tax policy,” but rather an accumulation and agglomeration of tax rules sponsored by special interest groups.
Worse, by taxing reported income for a few generations, the US has set up robust industries to avoid reporting taxable income, such as offshore bank accounts, a proliferation of tax deductions, and incredible explosions of cash in circulation. Bitcoin comes to mind too. People will pay $5000 for a bitcoin? Gee, I wonder why.
And remember, the federal government does not tax property. Not even a topic for discussion.
But then, maybe this is the way of government (read Mancur Olson).
Does the US have an agriculture policy, or is the USDA a gigantic rural subsidy and protection racket?
Does the US have a foreign policy, or a foreign policy-military deep state eager for status and tax revenues? Is setting up, and then propping up in perpetuity, an Islamic narco-state in Afghanistan, at a cost of $3 trillion and counting, something voters wanted?
The tax code has become such a vulgar manifestation of interest-group politics, that is is probably beyond redemption.
The GOP is lying about taxes for short-term gain?
I am shocked…shocked!
29. October 2017 at 20:52
Millions in wire transfers between 2012 and 2013 are the focus of FBI’s probe into Paul Manafort… This is the period that Manafort served as a liaison between Russia and the Podesta Group
30. October 2017 at 07:38
The scam is the 10-year deficit target. If they gave us a 30 or 50-year deficit forecast, everybody and their mother could see that all they’re doing is frontloading revenue to “pay” for tax cuts.
All this in the name of growing the economy while we’re at full employment. What a crock of shit.
30. October 2017 at 07:41
The other shoe on the Clinton/Epstein pedophile ring is about to drop. Assange has a new release ready to go, right after he takes care of Mueller.
Maybe this will finally get you statists to wake up, but I doubt it.
https://pbs.twimg.com/profile_images/794155936927596545/y8Kajmjd_400x400.jpg
30. October 2017 at 14:43
The comment at
30. October 2017 at 07:41
Supposedly by me, was not me, but was again an immature loser imitating me.
They say imitation is the sincerest form of flattery, but I don’t consider this loser’s imitations to be anything but sad pleas.
30. October 2017 at 14:49
Tony Podesta, who has been reported as a human trafficker and pedophile, connected to Clinton and brother of Clinton campaign manager John Podesta, also reported as a human trafficker and pedophile, is stepping down from the Podesta Group of lobbyists, amid Mueller’s probe.
http://archive.is/RuKJM
Of course, the CIA MSM complex has said NOTHING of this.
30. October 2017 at 15:31
Can one of you clever people build a filter to eliminate the annoying white noise of the numerous garbage comments here? I’m thinking an alternative URL. Something like:
http://www.themoneyillusionminustheretard.com
30. October 2017 at 15:49
The Podesta Group lobbied for Uranium One:
https://m.imgur.com/nw7J2gi?r
30. October 2017 at 19:00
The argument against lowering the limit for 401k contributions rests on the premise that we should prefer to tax consumption rather than wealth, no? What a wealthy person with a 401k doesn’t put into a 401k and spend in retirement he (per one theory) probably just spends it today, paying a higher tax rate, which I’m sure some people see as a good thing. Though more likely he probably just leaves it to an heir when he dies, and the estate tax would likely be lower than the tax out rich guy would’ve paid in retirement. In any case I don’t think you should take it for granted that your priorities on taxation are widely held. I agree about this 401k issues, but a lot of people (including some populist or moderate republicans) would say that being able to tax rich people more according to their wealth rather than their consumption rate (I.e. A lot more) is precisely the point. IOW, saying ‘by we’re taxing (disproportionately rich) savers twice” is likely to be met with a a chorus of “good!” People that don’t save can vote. It’s sad that the GOP would follow that logic, but thats the way the Zeitgeist is going.
On sexual harassment, I would note that the number of independent claims probably doesn’t increase the likelihood that at least one is true at the same rate if the accused is rich and famous. Accusing someone high profile of that can be an easy way to get publicity, which enough people really want (especially those who belong to the same narcissistic entertainment industry/real estate milieu to which Trump belongs). I gather he had the personality to do it, but once one person makes an accusation, it paints a target on one’s back for opportunists. Are there at least 16
Such individuals who can reasonably claim to have been in the same room as Trump? I wouldn’t definitively say no. It’s definitely possible. Add that plenty of otherwise more consc people would be willing to lie to tarnish Trump for what they see as the greater good of taking him down, I’d say exceptional scrutiny is probably warranted.
30. October 2017 at 22:36
One sentence cliff notes about today’s revelations:
The chairman of one major presidential campaign colluded with the brother of the chairman of the other major presidential campaign to enrich themselves by secretly advancing the interests of a foreign adversary
This is the swamp ladies and gentlemen
31. October 2017 at 08:23
Scott,
Why don’t you do a more a theoretical post on what kind of tax reform would increase or optimize utility. That would be interesting. Most of what’s written on this thread is just about political and economic personal preferences and self interest.
31. October 2017 at 18:20
ssumner, at no point have I denied Trump’s a frequent liar.