How does it make sense to want to tax 401(K)s when pension plans are on the way out?
To determine the loss to the government, the Joint Committee on Taxation and the Treasury look at taxes lost each year because of new 401(k) contributions, as well as the interest earned on existing contributions, and then subtract taxes paid on distributions from 401(k)s. The difference ranks 401(k) retirement plans as the third most expensive provision on the administration’s list of tax expenditures, projected to deprive the Treasury of an estimated $67 billion in 2012.
Because 401(k)s have only been around for a few decades, however, the value of the contributions and interest earnings still far exceeds the value of distributions to retirees, Graff said. That means traditional methods dramatically overstate the amount of revenue that ultimately will be lost.
The study says that a more accurate measure of retirement savings incentives would estimate the value of the tax breaks over the lifetime of the accounts. By that measure, the study shows, the loss to the government would be as much as 77 percent lower than official estimates.
This is a direct attack against 401(K)s. A company can have a pension plan, go out of business, and the pension plan disappears. A company can have a 401(K) plan, go out of business, and the employees still have their retirement money.
"The loss to the government" as in the government DESERVES to get MORE of your payroll check?