Or maybe it’s the off-ramp to Cyprus.
Over at lefty blog Talking Points Memo (h/t Joel Gehrke), Brian Beutler has noted an interesting item in the White House’s latest budget proposal: a cap on the amount one is allowed to save in tax-deferred accounts. Anything over that is open to the taxman.
Per the budget, “Individual Retirement Accounts and other tax-preferred savings vehicles are intended to help middle class families save for retirement. But under current rules, some wealthy individuals are able to accumulate many millions of dollars in these accounts, substantially more than is needed to fund reasonable levels of retirement saving.”
But how would they close this loophole?
One way experts believe financial managers avoid the current annual contribution limit to IRAs is by using IRAs to participate in investments and assigning those investment interests a nominal value vastly below fair market.
Obama wouldn’t curb this practice directly. Instead his budget calls for an overall cap of about $3 million on the net balance across all of an individuals’ tax-preferred accounts. Only have one IRA? It can hold $3 million. Have three? Their holdings must sum to $3 million or less.
The $3 million figure is approximate. A formula would set the cap at a level just high enough to finance an annual distribution of no more than $205,000 per year in retirement for someone retiring this year.
Now, I can imagine TPM is just thrilled with this; it just reeks of class warfare disguised as “fairness.” We’ve got “reasonable levels” (Defined by whom? Oh, wait…) and the ever popular “loophole,” with its scent of someone getting away with something, cheating the rest of us.
What the administration is talking about, I believe, are self-directed IRAs and other retirement vehicles that allow you to invest your money where you see fit (1). When you sell the stock and withdraw the funds, under the rules you’re taxed at a much lower rate. It’s a great vehicle for wealth creation and the encouragement of saving for retirement.
And that’s what they can’t stand. The rules as written prevent them from taxing this sheltered wealth to fund their bloated spending, so they’re going to change the rules. Oh sure, they say this is aimed the the “Romneys” of the world, those rich people who have sheltered more the $3 million, but how long do you think that barrier will last? About as long as it takes them to realize they need more.
Rocco always wants more.
This idea to tax sheltered money isn’t new; FDR, to whom Obama acolytes compare him, has his own undistributed profits tax, to punish businesses that were holding on to cash. (Look out, Apple!) That scheme blew up in Roosevelt’s face as business investment collapsed and the nation entered a new recession in 1937-38. You can bet a move like this would have its own unintended consequences, which the social engineers at Team Unicorn would blame on anyone but their own ham-handed, grasping, greedy policies.
This is progressivism showing its face as Leviathan. Forget that it was your skill and acumen and good habits that accumulated that wealth (and, through investing it, helped others by creating jobs, &c.); forget that this is, in the end, your money, yours to dispose of as you see fit, beyond that portion needed to fund the basic functions of government.
Forget all that.
The administrative state beloved by progressives knows what’s best. It has its plans and goals for us all, because it has divined the national will. Thus all the resources of the nation are at its disposal to meet those goals.
Including your retirement accounts.
This budget is dead on arrival, thank Heaven, but don’t think this scheme is going away. Oh, no. Once broached, it’s out there, waiting.
PS: I wonder if this is where Obama got the idea?
(1) You know: your money, your property, your liberty.
(Crossposted at Sister Toldjah)