Maybe Inevitable: Raiding Private Pensions to Balance the Budget
It's hard to imagine a worse economy than the Irish economy. And yet, things about it are tantalizingly familiar. Slow growth, big debt, stubborn unemployment, a major hangover from the financial crisis of 2008-2009.
It's the big debt that's interesting to me, mostly because we've got the same problem here. And, like here, the Irish government is searching the sofa cushions for loose change, turning vases and piggy banks upside down, thinking up new taxes and fees, doing anything to fire up some money.
Which turns out to be a simple matter of taxing private pensions. From Business Insider:
The Irish government plans to institute a tax on private pensions to drive jobs growth, according to its jobs program strategy, delivered today.
Without the ability sell debt due to soaring interest rates, and with severe spending rules in place due to its EU-IMF bailout, Ireland has few ways of spending to stimulate the economy. Today's jobs program includes specific tax increases, including the tax on pensions, aimed at keeping government jobs spending from adding to the national debt.
The tax on private pensions will be 0.6%, and last for four years, according to the report.
Two things we know for sure:
1. There's no way that tax will last four years. It's permanent.
2. Right this minute, people in the Obama administration are stroking their chins and thinking, "Hmmmm....."
Taxing private retirement accounts -- they're for the rich! they're for the millionaires and billionaires! -- has got to be on the list of new taxes and fees that they'll hit us with on January 25th, 2013. Assuming the worst.
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Aug '10
Re: Maybe Inevitable: Raiding Private Pensions to Balance the Budget
Of course union pension plans will be excluded (including govt unions).
(Although I have to wonder, do companies provide pensions anymore, other than unions?)
Oct '10
Re: Maybe Inevitable: Raiding Private Pensions to Balance the Budget
That would be insane. You can't pay off debt by taxing private savings--it's impossible to pay off large amounts of debt without a trade surplus, and you need lots and lots of private savings to sustain such a surplus.
The private sector would simply begin leveraging again, offsetting reductions in federal deficits. To really pay off the debt, we need economic growth, higher personal savings, fiscal consolidation, and, uh, dollar devaluation (the dollar is no longer overvalued, but current account/trade adjustments tend to push currencies below their fundamental level).
May '10
Re: Maybe Inevitable: Raiding Private Pensions to Balance the Budget
I think enough people have 401(k)'s that this is a non-starter. As to pensions, only union workers get those, so that's Sacred.
Roth IRA's are a different matter. I remember when those were first passed, and my accountant co-worker buddies were all excited. "Taxes may go up, and I'll be in a higher bracket, see, so I'll pay the low rate now and won't get taxed when I get the money." I cautioned them that they were assuming the law wouldn't change between then and their retirement. They looked at me like I had three heads.
Such a smart child I was.
Jul '10
Re: Maybe Inevitable: Raiding Private Pensions to Balance the Budget
Sounds like a new game: Pension Pennies
Nov '10
Re: Maybe Inevitable: Raiding Private Pensions to Balance the Budget
Obama and friends started thinking about this at least two years ago. Their idea is bolder. They don’t want to tax your 401K, they want to confiscate it.
Federal Mutual Fund
Obama and The Democrats Are Coming For Your 401K
Edited on May 12, 2011 at 12:33pmAug '10
Re: Maybe Inevitable: Raiding Private Pensions to Balance the Budget
Count me with Ducatista. Look for a proposal to "protect" the IRA and Keogh savers by requiring that their savings be invested in treasuries. Willie Sutton looked to the banks for the same reason.
May '10
Re: Maybe Inevitable: Raiding Private Pensions to Balance the Budget
This is not new see the following from the website http://www.senseoncents.com/2010/01/blueprint-for-government-takeover-of-iras/
Study Professor Teresa Ghilarducci’s Paper (Oct 2009):
Democratic leaders in the U.S. House discuss confiscating 401(k)s, IRAs – … 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. – Carolina Journal Online
Read Ghilarducci’s paper: Guaranteed Retirement Accounts – Toward retirement income security – Economic Policy Insitiute
Dec '10
Re: Maybe Inevitable: Raiding Private Pensions to Balance the Budget
"Today's jobs program includes specific tax increases, including the tax on pensions, aimed at keeping government jobs spending from adding to the national debt."
Jobs programs and jobs spending sounds newspeak to me. The political class really doesn't know how to do anything else but spend money do they. If I remember correctly, the last time this issue was raised around here, talk of guns immediately followed.
Dec '10
Re: Maybe Inevitable: Raiding Private Pensions to Balance the Budget
Don't be so sure. Starting next Monday we will begin dipping into Federal Pension funds to pay off the debt.
May '10
Re: Maybe Inevitable: Raiding Private Pensions to Balance the Budget
How Orwellian is, "institute a tax on private pensions to drive jobs growth"?
But this seems to be the new lingo. In about an hour from now, California Democrat legislators will be holding a "jobs budget summit" in the Silicon Valley to discuss how raising taxes will create jobs.
Feb '11
Re: Maybe Inevitable: Raiding Private Pensions to Balance the Budget
Ducatista: Obama and friends started thinking about this at least two years ago. Their idea is bolder. They don’t want to tax your 401K, they want to confiscate it.
Federal Mutual Fund
Obama and The Democrats Are Coming For Your 401K · May 12 at 12:21pm
Edited on May 12 at 12:33 pm
Ducatista nails it on the head. Currently all pre-tax retirement accounts (including pensions, 401k, Keogh, etc.) are subject to taxation when the individual makes withdrawals from the accounts. The amount of tax is depedent on the individual's tax bracket. In addition, in regards to 401k's when a person reaches the age of 70 1/2 there is a mandatory minimum withdrawal. The big specter is if Roth 401k's will become taxable. Currently, the Roth 401lk's are funded by after-tax money and the withdrawals are tax exempt. The most terrifying scenario as Ducatista notes is in the name of "safety" and "protection" the government confiscates the retirement accounts, manages the funds and tell you how much you are allowed to withdraw.
May '10
Re: Maybe Inevitable: Raiding Private Pensions to Balance the Budget
Yes, yes, it's technically possible. But not politically possible. Not gonna happen. Though Roth IRA's were always a crapshoot. Put not your faith in princes.
Remember, this can't be done by executive order. It requires legislation. If you can't pass cap and trade or union card check, you certainly can't pass retirement confiscation. That's even more sensitive than gas prices come November.
Edited on May 12, 2011 at 1:44pmAug '10
Re: Maybe Inevitable: Raiding Private Pensions to Balance the Budget
Am I glad I started paying into a pension fund in my 20s to build up a nice target for government ambush 20 years on? That fund has been plummeting sickeningly for the last few years anyway so I guess the state getting a piece of the shrinking asset is just more salt in the wound.Meanwhile the feckless who spent it while they had it (or not, as the case may be) get an unexpected bonus at my expense. Wasn't it something like this that inspired the Tea Party? The difference is that in Ireland and the rest of Europe the vast majority see no correlation between effort and income-every cent is fair game for redistribution and there is no major political party or movement to defend the productive-once again, America is exceptional.
Aug '10
Re: Maybe Inevitable: Raiding Private Pensions to Balance the Budget
This topic really irks me. Unlike a lot of my generation I'm trying to be self-reliant in preparing for retirement. I fully expect to not get any of my social security money back or any of those entitlements that are sending us over the cliff. I'm forgoing fancy vacations, and other material goodies to put aside money into retirement accounts. Then I hear that Democratic lawmakers are considering raiding personal retirement accounts because they don't have the you-know-whats to act fiscally responsible. Apparently, "Thou Shalt Not Steal" doesn't carry any weight anymore.
This would affect others closer to retirement more than it would affect me, but the principle of the matter...
Jun '10
Re: Maybe Inevitable: Raiding Private Pensions to Balance the Budget
Ducatista: Obama and friends started thinking about this at least two years ago. Their idea is bolder. They don’t want to tax your 401K, they want to confiscate it.
Federal Mutual Fund
Obama and The Democrats Are Coming For Your 401K · May 12 at 12:21pm
Edited on May 12 at 12:33 pm
Americans would convert their IRA's into hard assets faster than a kulak can turn a pig into ground sausage. At which point the run on the market would sink our economy to 1929 levels. And along with it the world economy. The only question in my mind is would the shooting start before or after the plan was enacted?
Sep '10
Re: Maybe Inevitable: Raiding Private Pensions to Balance the Budget
Is this tax on withdrawals, or on balances? If it's in withdrawals, this plan doesn't make any economic sense as it's just moving spending from private people to the government. Total spending in Ireland won't change. Correction, it won't change more than the withdrawals that would be, instead of spent, will be saved again in another account. And that can't be very much of the total.
Ireland needs a trade surplus and economic growth. This is just chopping up the pie in different ways, ways that will just slow economic growth even more as capital is invested in the inefficient public sector.