Before we forget…the president’s big batch of proposed tax hikes is still making its making its way through Congress. As Philip DeMuth writes, there are still a lot of issues to be ironed out, But the bottom line is Team Biden is probably going to make life much worse, and poorer, for a lot of taxpayers:
The president has also proposed eliminating the deduction for 401(k) contributions and replacing it with a tax credit. That would transport our customary retirement-plan strategies into the upside-down world. To avoid this income redistribution scheme, earners in the 20% brackets and above would have to avoid contributing to a traditional 401(k), while earners below the 20% brackets would have to avoid the Roth 401(k) to grab the credit instead. As certified public accountant Jeff Levine points out, your contribution could end up being taxed twice at the state level: once when deposited, and again when withdrawn.
After herding us into these plans for decades, Congress wants to change the rules to confiscate more of our savings—moving the goal posts exactly as the baby boomers head into retirement. Retirement plans are governed by a set of rules so convoluted they could be sold to Parker Brothers for a board game, yet are coupled with fines of up to half of the money for trivial infractions. This reckless rejiggering of the tax code shows contempt for the American worker.
Showing contempt, be it for workers, savers, entrepreneurs, and more, is one thing government does very well. But it’s not all doom, gloom, and no soup for you in retirement. The verdict on whatever version of the Biden tax plan Congress approves will be rendered during the 2022 midterm elections. If history is a guide, a president’s party generally suffers substantial losses in midterms. A whopping big tax hike may make history repeat itself next year.