The Carolina Journal Online reported Tuesday that the Democrats aren't content to let you have your own piece of your retirement pie. They want it all under their thumb. (emphasis all mine)
Democrats in the U.S. House have been conducting hearings on proposals to confiscate workers’ personal retirement accounts — including 401(k)s and IRAs — and convert them to accounts managed by the Social Security Administration.
Triggered by the financial crisis the past two months, the hearings reportedly were meant to stem losses incurred by many workers and retirees whose 401(k) and IRA balances have been shrinking rapidly.
The testimony of Teresa Ghilarducci, professor of economic policy analysis at the New School for Social Research in New York, in hearings Oct. 7 drew the most attention and criticism. Testifying for the House Committee on Education and Labor, Ghilarducci proposed that the government eliminate tax breaks for 401(k) and similar retirement accounts, such as IRAs, and confiscate workers’ retirement plan accounts and convert them to universal Guaranteed Retirement Accounts (GRAs) managed by the Social Security Administration.
It's all about equality. Not equality of opportunity, but equality of outcome. And the devil is in the details.
GRAs would guarantee a fixed 3 percent annual rate of return, although later in her article Ghilarducci explained that participants would not “earn a 3% real return in perpetuity.” In place of tax breaks workers now receive for contributions and thus a lower tax rate, workers would receive $600 annually from the government, inflation-adjusted. For low-income workers whose annual contributions are less than $600, the government would deposit whatever amount it would take to equal the minimum $600 for all participants.
In a radio interview with Kirby Wilbur in Seattle on Oct. 27, 2008, Ghilarducci explained that her proposal doesn’t eliminate the tax breaks, rather, “I’m just rearranging the tax breaks that are available now for 401(k)s and spreading — spreading the wealth.”
Where have I heard that before?
All workers would have 5 percent of their annual pay deducted from their paychecks and deposited to the GRA. They would still be paying Social Security and Medicare taxes, as would the employers. The GRA contribution would be shared equally by the worker and the employee. Employers no longer would be able to write off their contributions. Any capital gains would be taxable year-on-year.
As bad as all that is, that isn't enough confiscation of your retirement funds to suit the Democrats.
Analysts point to another disturbing part of the plan. With a GRA, workers could bequeath only half of their account balances to their heirs, unlike full balances from existing 401(k) and IRA accounts. For workers who die after retiring, they could bequeath just their own contributions plus the interest but minus any benefits received and minus the employer contributions.
To summarize, if I'm understanding this right, is that they'll take our 401(k) or IRA, guarantee an unreal return of 3%, force us to contribute 5% of our income whether we can afford that or not, and then they'll take whatever earnings and employer-contributed funds are left when we die. Oh, yeah, that sounds lucrative!
President-elect Barack Obama has admitted his goal is to spread the wealth from the successful (the upper middle class, not the truly wealthy who have ways of hiding their money from the tax man) to the less successful and the ones who don't even try. But I had no idea they'd be going after retirement accounts.
Hang onto your wallets, because there's no telling what they'll be trying to confiscate next.