Taxing Your Retirement
Last week, with little notice, Senate Democrats held a hearing in the Finance Committee on ways to tax retirement savings. Just as we are beginning to have a national discussion about reforming entitlements and saving Social Security, Senate Democrats are trying to make it more difficult for hard-working Americans to save more.
Here's the thrust of the proposal: Contributions to 401(k) accounts would be subject to taxation, as would contributions to IRAs. Employer contributions would also be treated as taxable income. But you would be eligible for a refundable tax credit that would be deposited into some account.
And when you retire, guess what? "[W]ithdrawals from the accounts would continue to be taxed as income." Under current plans, you are taxed only once -- either now or later. But this new liberal proposal "shockingly" suggests that savers may be double-taxed.This bizarre idea is going nowhere, thankfully, because conservatives control the House of Representatives. But it is a good reminder of the differences between the two parties. Democrats' first instinct is always to raise taxes and find more revenue for Big Government, while Republicans want to let you keep more of your hard-earned money!
Gary Bauer
Campaign for Working Families
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