Quote:
Originally posted by ltl/fb
Not if we then switch to a consumption tax and they pass on all that savings to their kids, who continue saving it (or owning capital with it), and passing it on.
But I am mixing two theories. So I will just address the issue w/o using the cheap shot of slapping you with your theories.
Under the current system, money deferred into a 401(k) is subject to SS taxes, but not income taxes, when you put it in, and is subject to income taxes, but not SS taxes, when you take it out. Since SS taxes on that money aren't deferred, the whole projection of SS tax intake vs. benefits paid would be unaffected by increasing 401(k) limits.
The tax revenues that would be increased at the time of withdrawal are the income tax revenues. I think, and you probably agree, that it's all one big pot of money. But people don't see it that way, and the whole "SS deficit" is not couched in those terms. It's seen as a separate deficit from the regular income/spending deficit.
|
Fair points, but I'm not really trying to address the precise question of saving SS through increasing 401ks. That said, the SS deficits will almost certainly have to be funded through ordinary income tax revenues, if for no other reason than to pay the IOUs. Good timing if retirees are wihdrawing from their 401ks
As for passing along--the taxes get paid eventually. First, IRAs have mandatory withdrawals (as do 401ks, no?), so you have to pay the taxes at 70+. If you pass to the kids, they still have to withdraw. And if you convert to a Roth in the meantime, you have to pay taxes then. All they provide for is tax deferral, not tax avoidance.
