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GOP tax plan musing...capping 401k contributions at $2400 year

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Fern said:
In general I support the estate tax (not that the rich have actually had one). But if it's done away with I can't imagine that the cap gain tax exclusion would still apply. If there's no estate tax, there should obviously be no step-up in basis of cap gain property. In fact, I think the deceased person's estate should pay cap gains whether or not the asset is sold/liquidated (of course in that example the heirs would get a step-up in basis since tax had been paid).

Fern
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Good luck with that. GOP will cut both estate taxes and capital gains. They are wholly corrupted by their big donors.
 
Heard something interesting on CNN money....a person on there suggested that the $2,400 cap on deferred would not really be deferred. You would not pay taxes on the first $2,400 on contributions, would pay up front taxes on the remaining contributions and when you withdraw the money, you would pay NO taxes on any of the gains or contributions. So that would move the revenue mostly forward (to today) and give a double dip in not paying taxes EVER on the initial $2,400 each year. I just can't see the government giving up that much money and never getting taxes on it. Deficits be damned I guess.

Probably not going to happen but these guys are desperate to get enough revenue to cut taxes for those at the top. Not sure how any of this mess passes the Senate on reconciliation when there is a $1.5 trillion cap on the cuts over a decade.
 
Engineer said:
Heard something interesting on CNN money....a person on there suggested that the $2,400 cap on deferred would not really be deferred. You would not pay taxes on the first $2,400 on contributions, would pay up front taxes on the remaining contributions and when you withdraw the money, you would pay NO taxes on any of the gains or contributions. So that would move the revenue mostly forward (to today) and give a double dip in not paying taxes EVER on the initial $2,400 each year. I just can't see the government giving up that much money and never getting taxes on it. Deficits be damned I guess.

Probably not going to happen but these guys are desperate to get enough revenue to cut taxes for those at the top. Not sure how any of this mess passes the Senate on reconciliation when there is a $1.5 trillion cap on the cuts over a decade.
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Repubs don't care about future govt revenues. They care about looting the Treasury now on behalf of the ultra wealthy & hobbling the govt under enormous debt load down the road. They'll necessarily move the tax burden down the scale & into the future in the process.
 
Jhhnn said:
Repubs don't care about future govt revenues. They care about looting the Treasury now on behalf of the ultra wealthy & hobbling the govt under enormous debt load down the road. They'll necessarily move the tax burden down the scale & into the future in the process.
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Yeah, the old "broaden the base" from Romney (and his 47% comment) comes to mind.
 
Engineer said:
Heard something interesting on CNN money....a person on there suggested that the $2,400 cap on deferred would not really be deferred. You would not pay taxes on the first $2,400 on contributions, would pay up front taxes on the remaining contributions and when you withdraw the money, you would pay NO taxes on any of the gains or contributions. So that would move the revenue mostly forward (to today) and give a double dip in not paying taxes EVER on the initial $2,400 each year. I just can't see the government giving up that much money and never getting taxes on it. Deficits be damned I guess.

Probably not going to happen but these guys are desperate to get enough revenue to cut taxes for those at the top. Not sure how any of this mess passes the Senate on reconciliation when there is a $1.5 trillion cap on the cuts over a decade.
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Aside from the obvious implications of moving revenue forward, contributing to deficits in the future, etc, I must say this plan sounds like an absolute accounting nightmare.

They'd be mixing money that follow different taxation rules in one account, the custodians would have to forever keep track of any capital gains, any dividends and coupons, any transactions, buys or sells, fund transfers, fund rollovers, to make sure that the money contributed prior to the change does not get mixed with the money contributed after the change to ensure that only the "old" money gets taxed at withdrawal. This is a nightmare. It would almost be better to "close" any old style 401K accounts to new contributions and create a new 401Kv2 plan going forward simply to avoid the accounting complexity. This whole thing is just dumb.

The sad thing is I know that I (and a lot of other Americans) are about to get screwed, but at this point it's just not worth getting upset about things that I have zero control over. It's not worth getting aggravated over. No matter what my feelings are there is nothing that I can personally do to change the tax plan outcome. All that I can do is sit and wait for the final plan to be unveiled. It's going to be written without input from the general public, and it's going to be passed without any input from the general public, or it's going to be passed despite input from general public (see recent FCC decisions on local cable laws and net neutrality for example). It would be nice if people rose in protest and voted all the scum out of the office, but as history shows incumbents will overwhelmingly win their seats again.
 
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senseamp said:
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Good luck with that. GOP will cut both estate taxes and capital gains. They are wholly corrupted by their big donors.
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I do not agree with the reduction of the 401(k) contribution limit and I doubt it will go through.

If someone really wanted to collect more tax...it wont be through the estate tax when the exemption will be 5.6 million a person in 2018. A better way would be to get rid of estate tax and remove any step up in basis on death. The original basis will transfer to the heir and pay tax on any gains. This would get a larger portion of the population that would normally be exempt of estate tax, then they get a step up in basis and pay no tax at all when they sell the asset.
 
Republican rich donors are completely misreading the populist moment, and are pushing Republican politicians for what they think will be a "permanent" tax cut, and to do that, Republicans will have to come up with offsets. Otherwise, the tax cuts will sunset in 10 years like Bush tax cuts did. Since their base of useful idiot is already squeezed, all they have left to squeeze is the upper middle class. So I think they will go through with shrinking pretax 401K and deduction for state income taxes, and I think it will backfire on them in the long run because these are swing voters, but they are so afraid of pissing off their rich donor base for 2018 that they will do it.
 
senseamp said:
Republican rich donors are completely misreading the populist moment, and are pushing Republican politicians for what they think will be a "permanent" tax cut, and to do that, Republicans will have to come up with offsets. Otherwise, the tax cuts will sunset in 10 years like Bush tax cuts did. Since their base of useful idiot is already squeezed, all they have left to squeeze is the upper middle class. So I think they will go through with shrinking pretax 401K and deduction for state income taxes, and I think it will backfire on them in the long run because these are swing voters, but they are so afraid of pissing off their rich donor base for 2018 that they will do it.
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Repubs' rich donors are counting on the idea that there will probably always be enough Repubs in the Senate to block tax increases in the near future. Possibly falling out of power is the risk Repubs take for money upfront.
 
if this actually happens, i am literally going to laugh in my parent's faces as they own a 401k financial planning business (that is currently for sale) and they both voted for Trump.
 
My parents refuse to alter their views of Trump and the Republican party no matter what they do so go figure. This is the support that keeps idiots like these in power.
 
I would prefer if they made saving for retirement more appealing, for example allow X dollars contribution as a tax deduction and also make it tax free when withdrawn during retirement The fact that there is a limit on the amount per year, makes it completely useless to the rich. This makes it a no-brainer even for the average Joe. Without easy options for retirement savings, there will be more workers unable to retire or lead to more dependence on the government. The lack of pensions, Social Security taking a nose dive and poor 401k will only lead to a worse distribution of wealth.

I'm not a fan of the current proposal, it seems to be backwards thinking by ultra-wealthy that don't have a need to learn to save for retirement because of their inflated bank accounts.

This is a similar issue to when congress passed Obamacare, they won't have any need for Obamacare so they are guessing what is good for the peons.
 
Jhhnn said:
Repubs' rich donors are counting on the idea that there will probably always be enough Repubs in the Senate to block tax increases in the near future. Possibly falling out of power is the risk Repubs take for money upfront.
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They can get far more money upfront if they don't have to worry about it being revenue neutral, but then it will expire in 10 years.
 
Sure, just waiting for the other shoe to drop. While my meager 401k is up, I know good things dont last. the slow climb over 5-6 years all of a sudden doubles or triples? yea....we will see.
 
bshole said:
My wife and I have put 30k/yr into 401k for years. Explain to me why we must detonate our responsible retirement plans by limiting that number to less than 5k/yr to give the ultra wealthy a sackful of cash. Removing the tax deduction is equivalent to limiting it. Removing it would result in a cost of 40k to make a 30k investment.

Do you get that this will drastically impact me negatively and many other working families like mine? I am being punished for attempting to do the responsible thing and provide some independence for myself in retirement. What in the fuck am I supposed to do now? Fuck the republicans. I wish there was a hell they could go to when they die. They are evil bastards who don't give a shit about the backbone of America---- the MIDDLE CLASS.
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As someone in your exact same position..... Come on dude, you're not the middle class. I'm not the middle class. A household > $100k /year isn't really the middle class anymore. You and I are both safely in the privileged upper class of the top 10%.

I agree with one thing - I'm tired of incentivizing itemized deductions. So I'm fine with getting rid of the mortgage interest rate deductions, state tax deductions, etc... But where I draw the line is when they are effectively trading off those deductions in order to justify getting rid of the estate tax as well...
 
s0me0nesmind1 said:
As someone in your exact same position..... Come on dude, you're not the middle class. I'm not the middle class. A household > $100k /year isn't really the middle class anymore. You and I are both safely in the privileged upper class of the top 10%.

I agree with one thing - I'm tired of incentivizing itemized deductions. So I'm fine with getting rid of the mortgage interest rate deductions, state tax deductions, etc... But where I draw the line is when they are effectively trading off those deductions in order to justify getting rid of the estate tax as well...
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I very much agree. I’m down with eliminating basically all deductions (although in a gradual way) but doing that to give tax breaks to millionaires and billionaires is ridiculous.

This would all have to be done carefully as to not tank the housing market and to basically loot blue states for the federal treasury but in principle there is no good reason to incentivize owning over renting or to have state taxes reduce federal ones.
 
Linux23 said:
My mortgage deductions is one of the biggest reasons why I purchased a home.
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This is true for a lot of people. If they do in fact eliminate the MID or render it useless through increases in the standard deduction your home will probably lose quite a bit of value.
 
fskimospy said:
I very much agree. I’m down with eliminating basically all deductions (although in a gradual way) but doing that to give tax breaks to millionaires and billionaires is ridiculous.

This would all have to be done carefully as to not tank the housing market and to basically loot blue states for the federal treasury but in principle there is no good reason to incentivize owning over renting or to have state taxes reduce federal ones.
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I thought you were smarter. Low overhead is the key to middle class retirement. Owning your home outright is a huge step in that direction. Paying rent sucks the cash & the life out of median families & below. Rent rarely goes down and the value of a fixed mortgage payment diminishes greatly over time other than in a deflationary scenario.

Paying rent your whole life locks people into the work until you die scenario.
 
Jhhnn said:
I thought you were smarter. Low overhead is the key to middle class retirement. Owning your home outright is a huge step in that direction. Paying rent sucks the cash & the life out of median families & below. Rent rarely goes down and the value of a fixed mortgage payment diminishes greatly over time other than in a deflationary scenario.

Paying rent your whole life locks people into the work until you die scenario.
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I'm terribly sorry to disappoint you with my limited intellect, but you're very much mistaken. The MID hurts the middle class, it does not help it.

Look at it this way:

1) Housing prices for regular people are primarily determined by the effective amount they pay each month in 'rent', meaning mortgage and property taxes combined.
2) When you give someone an income tax break for buying a house you effectively increase the 'rent' they can afford to pay and therefore housing prices go up.
3) The single largest obstacle to home ownership is the down payment, not the monthly mortgage payment, and the MID makes the down payment higher.
4) Therefore, the MID makes owning a home harder for regular people, not easier.

Also, the MID is primarily used by the upper middle class and rich, not the people who need help the most.

Paying rent is preferable to owning a home in any number of circumstances as it limits downside risk, sudden expenses, and increases mobility. Regardless, it's a choice everyone needs to make for themselves and there's no reason for the government to incentivize buying a house. If they want to subsidize middle class retirement they should just do it directly.
 
fskimospy said:
I'm terribly sorry to disappoint you with my limited intellect, but you're very much mistaken. The MID hurts the middle class, it does not help it.

Look at it this way:

1) Housing prices for regular people are primarily determined by the effective amount they pay each month in 'rent', meaning mortgage and property taxes combined.
2) When you give someone an income tax break for buying a house you effectively increase the 'rent' they can afford to pay and therefore housing prices go up.
3) The single largest obstacle to home ownership is the down payment, not the monthly mortgage payment, and the MID makes the down payment higher.
4) Therefore, the MID makes owning a home harder for regular people, not easier.

Also, the MID is primarily used by the upper middle class and rich, not the people who need help the most.

Paying rent is preferable to owning a home in any number of circumstances as it limits downside risk, sudden expenses, and increases mobility. Regardless, it's a choice everyone needs to make for themselves and there's no reason for the government to incentivize buying a house. If they want to subsidize middle class retirement they should just do it directly.
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Heh. I've been hearing the same song & dance for decades. The guys who sang it can't retire because they can't bring down their overhead. Landlords are still beating the cash out of them every month of their lives. If we hadn't paid off the house early our payment would still be $563/mo, same as it was in 1993. You can't rent a converted chicken coop in Denver for that money. A decent 2 bedroom apartment is twice that, easy.

As prices have risen the MID is more important than ever for young families. To cap it would be one thing while eliminating it would be entirely another. It's somewhat of a different story when your income is large & you can make other sizeable investments but most Americans never get there.
 
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