To Confiscate 401(k)s and IRAs For Mandatory Savings Tax?
Under the pretext of combating the financial crisis, Democrats in Congress have been conducting hearings on proposals to confiscate private retirement accounts and turn them into government-controlled accounts managed by the Social Security Administration, by implementing a new tax in the guise of mandatory savings scheme.
Teresa Ghilarducci, professor of economic policy analysis at the New School for Social Research in New York, testified before Congress last month, proposing that 401(k)s and IRAs be confiscated and converted into universal Guaranteed Retirement Accounts (GRAs) managed by the Social Security Administration.
The GRAs would be enforced by means of a mandatory savings tax equating to 5 per cent of an individual's annual paycheck deposited to the GRA. Social Security and Medicare taxes would still be payable, employers would no longer would be able to write off their contributions and capital gains would be taxable year-on-year. In addition, workers could bequeath only half of their account balances to their heirs, unlike full balances from existing 401(k) and IRA accounts.
Justifying government intervention, Ghilarducci cited a 2004 HSBC global survey in claiming, "a third of Americans wanted the government to force them to save more for retirement." In actual fact, the survey concluded that Americans wanted the government to "enforce additional private savings," a vastly different meaning than mandatory government-run savings, as Karen McMahan points out.
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The mandatory savings account scheme is actually a brainchild of lifelong Republican and former chairmen of the New York Fed, Peter Peterson, who proposed "mandatory savings accounts," also called "forced savings accounts," back in 1999.
During a Seattle radio interview on October 27, Ghilarducci explained the motive behind the plan, stating, "I'm just rearranging the tax breaks that are available now for 401(k)s and spreading - spreading the wealth."
Unfortunately, as we have again painfully learned in light of the Federal Reserve's refusal to identify where $2 trillion of taxpayers' money has gone, governments that propose "spreading the wealth" under socialist-style financial reforms almost always collect the wealth under the pretext of being the saviors before greedily hoarding it all for themselves.
Ghilarducci let slip the true agenda being the move in her testimony before Congress and also acknowledged that social security payments are a form of taxation when she stated, "Should we mandate savings in a recession? Yes, as long as fiscal policy provides for short-term stimulus. No one is proposing we suspend Social Security taxes in recessions. Households need a source of disciplined savings over the business cycles."
Would the government risk a widespread revolt and potential riots by confiscating 401(k)s and IRAs? They probably wouldn't brazenly do it under that banner, but in the name of financial reform and saving the economy, Americans could find their voluntary retirement savings stolen and replaced by a government promise of a completely devalued mandatory savings account.
As the Lew Rockwell blog notes, the intention of the move is clear, but it will be down to American citizens whether or not the government is allowed to get away with it.
Argentina has already vowed to push through similar measures in the name of rescuing the wider financial system. Last month, the government of the South American country signed a bill to mandate the National Social Security Administration takeover of $30 billion worth of private pensions.
The move sent stock markets plummeting with critics accusing the government of stealing the pensions to get their hands on extra money at a time of economic crisis, as citizens protested across the country.
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