Among the many tax “loopholes” on the chopping block in the fiscal cliff negotiations are the 401(k) contribution limits. Liberals like to refer to tax deductions, deferrals, and exemptions as “spending through the tax code,” or “tax expenditures.” Of course, there are certain tax subsidies and credits that might best be described as spending (e.g., subsidized coverage on the Obamacare exchanges).
But conservatives and libertarians recognize that private property rights are at the foundation of individual liberty, and that any just government must be dedicated to protecting the individual’s right to the fruits of his labor. Treating a legitimate tax deduction as government spending presumes that the government has a right to those fruits by default - that we are privileged to retain any such fruits, and the government spends its funds in permitting it. This confiscatory mindset is foreign to our founding and inconsistent with our nature.
The proposed changes to 401(k) contribution limits are a good example of the threats to economic liberty we face as the revenue hawks continue to scour the tax code for backhanded tax increases.
What is a 401(k) Plan?
The traditional 401(k) plan is a method of tax deferral. You contribute with pre-tax dollars, the account grows tax-free, and you pay ordinary income tax on the distributions when you retire. If your employer offers a Roth option, you can contribute with after-tax dollars, and both the gains and distributions will be tax-free. In 2012, employees can elect to contribute up to $17,000, and the total employer/employee combined contribution limit is $50,000.
What’s Being Proposed?
A couple of items in the news lately have brought the judiciary back into the consciousness of the American public; the announced retirement of Supreme Court Justice John Paul Stevens, and the recent decision by federal judge Barbara Crabb in Wisconsin in which she ruled that the National Day of Prayer is a violation of the Establishment Clause of the U.S. Constitution. In the rulings of both justices we find an egregious disrespect for the plain meaning of the Constitution, and it is a failure of the American people to learn the Constitution that has allowed us to stray so far.
As a nation, we have reached a point where we bestow upon the courts an unjustified level of deference to their perceived wisdom. In fact, the Founding Fathers created the judiciary to be the weakest of the three branches, vested as they are with lifetime appointments.
Thomas Jefferson wrote (in a letter to William C. Jarvis, 1820) that “To consider the judges as the ultimate arbiters of all constitutional questions [is] a very dangerous doctrine indeed, and one which would place us under the despotism of an oligarchy. Our judges are as honest as other men and not more so.” Yet today we have allowed the courts to be elevated to the level of an oligarchy, where we accept rulings that are clearly unaligned with the Constitution without so much as a whimper.
Podcast: 10th Amendment Summit, Joseph Stacks, CPAC, Bayh’s Retirement, 2010 Midterms, Guests: Ray McBerry & Mike Hassinger
This week, Jason and Brett speak with Georgia Gubernatorial candidate Ray McBerry (you may recall his Liberty Candidate interview with us) and United Liberty contributor and political consultant Mike Hassinger on this week’s show. Unfortunately, Mr. McBerry’s schedule only allowed him to join us for the first topic.
Together, they discussed:
Continuing our “Liberty Candidate Series” of interviews, Jason and Brett talk with Marlin Stutzman, discussing the retirement of Evan Bayh (D-IN), Hoosier jobs, energy policy, and fiscal conservatism. Stutzman is one of five Republican candidates seeking the Republican nomination for Indiana’s U.S. Senate seat this year.
This special edition podcast is the seventh in a series devoted to showcasing liberty candidates nationwide.
After absorbing the news from every outlet on earth yesterday, even our own editor’s take, on the “surprise” retirement of Indiana Democrat Evan Bayh, I have to say that analysts are not considering all the “good” that can come from his retirement from the U.S. Senate. It seems that everyone predicts a Republican to pick up his seat in November. Lately, I have been among the few to see some things that ebb against the accepted flow in analyzing races and situations. This is another such ebb.
I think the reason that Bayh waited until Presidents’ Day to announce his retirement was to prevent someone relatively unknown, like Tamyra d’Ippolito, from garnering the nomination without a primary election AND without their seal of approval by collecting the requisite signatures necessary to get on the primary ballot. The Democrats have an opportunity to select a candidate, since it seems that d’Ippolito did not achieve the 4500 signatures necessary to get on the ballot. If she had, that is the WORST CASE SCENARIO for Democrats. By waiting, Bayh almost assured that the state Democrat Party could spend time vetting, choosing and fundraising for someone “moderate” enough to win the state, but “progressive” enough to fully support the agenda of the party for the next six years. While d’Ippolito likely fills out the latter, there is no chance she can accommodate the former.
Every now and again there is story about how some group is lobbying for government to takeover private 401(k) plans. Not much ever comes out of it, just an acknowledgment of something most of us already know…the government wants our money.
So it shouldn’t come as a surprise to hear that the Obama Administration wants to encourage retirement account holders to convert to an annuity:
The Obama administration is weighing how the government can encourage workers to turn their savings into guaranteed income streams following a collapse in retiree accounts when the stock market plunged.
The U.S. Treasury and Labor Departments will ask for public comment as soon as next week on ways to promote the conversion of 401(k) savings and Individual Retirement Accounts into annuities or other steady payment streams, according to Assistant Labor Secretary Phyllis C. Borzi and Deputy Assistant Treasury Secretary Mark Iwry, who are spearheading the effort.
The “good news,” using that term loosely, is that it’s voluntary…at least for now. How long would that last? Probably not long. You also have to question the use of the word “annuity.” Social Security is basically an annuity, though there are some differences. Why not just say you’d be investing your retirement in the Social Security system?
Podcast: Senate Retirement, Air Marshals, Full Body Scanners, Michael Yon, ObamaCare, Pottawattamie vs. McGhee, & More
In 1920, Italian immigrant, Charles Ponzi, developed a scheme which promised high-yield returns on the arbitrage and trade of international postal reply coupons. It sounds like a fancy scheme even today and it fooled many investors at the time. Ponzi, however, was not actually making such investments. He was taking money from new investors, drawn by the promise of high returns, to pay off past investors. A brilliant little scheme except for the fact that it is essentially stealing and fraudulent. This basic framework is now called a Ponzi scheme, and former NASDAQ chairman, Bernard Madoff, has been implicated in what may be the biggest Ponzi scheme of all time.
Sen. Max Baucus (D-MT), who has served in the upper chamber since 1978, announced yesterday that he won’t seek a seventh term in office in the 2014 mid-term election:
Longtime Sen. Max Baucus, D-Montana, will not seek re-election next year, he said in a statement Tuesday.
“After much consideration and many conversations with my wife Mel and our family, I have decided not to seek reelection in 2014. I will serve out my term, and then it will be time to go home to Montana,” he said.
During the remainder of term, Baucus pledged to fight the nation’s fiscal issues and work for highway and farm bill that will support jobs in his state.
The announcement comes a week after Baucus, who chairs the Senate Finance Committee, told DHHS Secretary Kathleen Sebelius that the administration’s implementation of ObamaCare, a law he helped write and usher through the Senate, could become a “train wreck.” Republicans have seized on the comments and used them to further criticize the controversial, unpopular law.
Baucus was considered vulnerable in 2014. According to a survey released in February by Public Policy Polling, Baucus could have faced a tough race against a strong Republican candidate. His approval rating with Montana voters was also underwater, at 45/48. An approval rating below 50% is generally considered a red flag for an incumbent.
The SCOTUS is set to rule this week on Obamacare, and that ruling will likely hinge on the individual mandate.
Conservatives, libertarians, constitutionalists, and just about everyone anywhere close to the right wing, oppose the individual mandate. Their criticisms center on this belief: government should not be able to force anyone to purchase a good or service. Fair enough.
Accepting that belief, however, raises some questions for an honest intellect. What about Social Security?
Social Security, created by Congress in 1935, is essentially a compulsory retirement program. The money is automatically withdrawn from your paycheck. There isn’t an opt-in, and there isn’t an opt-out. There is no choice—it’s a mandate.
There are, however, a couple of differences between the ObamaCare mandate and that found in the Social Security program.
First, the government taxes people to pay for the program rather than mandating it and allowing them to shop around in the market place. Apart from the distortion of forcing people into the marketplace, Obamacare allows people to use the market to choose their insurance. You can choose plans that better fit your needs. Social Security doesn’t allow that luxury.
Second, Obamacare’s mandate doesn’t proscribe a specific amount that consumers must spend. Social Security isn’t so lax. It requires 4.2% of employees’ income, a matching 6.2% from employers, and, from the self-employed, 10.4%. You can’t compare rates between firms, and you can’t shop for a better price.
In other words, Social Security not only mandates that you buy a product—retirement savings—but it also mandates from whom and for how much you have to purchase the service.
Can any intelligent and consistent person oppose Obamacare’s individual mandate and simultaneously support compulsory participation in Social Security? It’s a hypocritical attitude, and it should be abandoned.