Joe the Blue Collar worker puts in 16,500 in his 40′s when he is in 28% tax bracket and saves $4,620 in taxes. Money triples to $49,500 and he sells when he is old and is in 10% tax bracket and pays $4,950 in taxes. Govt only gets an extra $330 in taxes after Joe’s 30 year tax deferral.
Steve rich guy, puts in 16,500 in his 40′s when he is in 40% tax bracket and saves $6,600 in taxes. Money triples to $49,500 and he sells when he is old and is still in 40% tax bracket as he is rich and pays $19,700 in taxes. Govt gets an extra $13,100 in taxes after Steves’s 30 year tax deferral.
Saverof NY9:12AM May 18, 2011
The article fails to mention the reason for reduced tax rates for dividends and capital gains is because of the fact that corporate income is taxed once already before being distributed to stockholders.
Maverickof OH6:28PM May 06, 2011
Amen to what Tony just said. It would be very bad policy to discourage people from saving on their own for retirement by taking away the tax deferral opportunity. Too many now are depending on social security for their only retirement income. I am really tired of the government thinking they have a right to our hard earned money.
Karenof FL1:02PM April 25, 2011
Left or Right, this is a bogus set of numbers. There are no tax breaks with respect to these plans. In each case, except for Roths, the taxes are merely deferred. It's pay me now or pay me later.
Now that the baby boomers are beginning to retire and draw on these plans, the government will be collecting at full earned income rates (not favoarable capital gain rates) all of the money withdrawn including contributions, accumulated dividends and capital gains. None of this seems to be reflected in the numbers. In the end, the government is collecting more, just getting it later.
MPWof NY10:26AM April 20, 2011
There are good tax breaks and bad tax breaks. Retirement accounts like IRA and 401(k) are good tax breaks for working and middle-classed people because they encourage saving for retirement instead of relying on social security. Plus there are caps on the amounts exempt from taxation, so it is not a big benefit for the ultra-wealthy. Eliminating this tax shelter will increase the overall costs to government because people will be discouraged from saving for retirement in their working years, resulting in the demand for more government support for these non-savers when they retire. Social security was designed to be a supplemental retirement source; it was never designed to be the primary source of retirement needs. Eliminating tax shelters for retirement accounts is bad policy, even from a left-of-center perspective.
NSSof PA9:45AM April 20, 2011
There needs to be a whole new attitude in government. They work for us and their customer service stinks. It is our money not the governments, they are not losing anything, they have just stolen less. And we elect these thieves.
Tonyof IL8:41AM April 20, 2011
Little Emily seems confused: having a lower tax rate for savers to provide funds for investment is a good idea. She also seems to think that Social Security will cover all the needs of people in retirement....
Tom Rof CT8:40AM April 20, 2011
i agree with first commenter. I don't live to fund the government. The real solution is to cut govt down significantly. Might take time since govt has done such a good job creating dependent leeches out of many of our fellow citizens.
But in the end, it is the sensible solution - on our current course, tax rates will = 100% and we'll still have deficits.
Chris Grandeof MA12:03PM April 19, 2011
"costs us" ? Whose money is it? I don't believe the Federal Government "pays" anything to "purchase" our taxes. They simply demand it from us to misappropriate as they choose and after they are finished squandering what they've taken they come take more.
What a silly little story from a member of the "entitled" generation.
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Saver of NY 9:12AM May 18, 2011
Maverick of OH 6:28PM May 06, 2011
Karen of FL 1:02PM April 25, 2011
MPW of NY 10:26AM April 20, 2011
NSS of PA 9:45AM April 20, 2011
Tony of IL 8:41AM April 20, 2011
Tom R of CT 8:40AM April 20, 2011
Chris Grande of MA 12:03PM April 19, 2011
D Schuettinger of NH 10:20AM April 19, 2011