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Cato Institute Tax Policy Studies Director Chris Edwards on Congress considering taxing retirement savings.
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Is your retirement safe from Uncle Sam and aren't we already taxed enough for more I'm joined by Chris Edwards director of tax policy studies -- yeah.
He's also the editor of downsizing government dot org Chris welcome to the show.
I wanna tell you just a little bit first about what this proposal would do first of all.
It would cut the -- and -- could contribute to your 401K from 50000 to 20000.
There's also some plans to substitute the benefit with a tax credit.
Chris -- -- we already paid taxes on the savings.
You're you're exactly right the basic problem with the income taxes that a double taxes savings.
You are taxed on your initial wage earnings.
And then if you vote by say it TV -- you don't pay any further income tax but if you say -- vineyard double tax this makes no sense.
Every advanced country recognizes this and provide special provisions for savings.
And so we have for a one -- and Roth IRAs to to reduce this punitive treatment of savings under the income tax.
So the 401K plans are not broken and and here we have some politicians in Washington and wanting to break -- makes absolutely no sense well.
They -- broken in the sense that we're under say we don't have enough savings to retire on.
And it seems to me Chris you tell me what you think that if somebody comes out with another tax on retirement savings a lot of people out there will just opt not to say that all.
Well that's right I mean savings is this seed corn of investment.
An economic growth we want Americans to say we want middle income Americans to save poor people.
Rich people to say we want everyone to save the more savings.
The more business investment in the economy that is good for everyone so we do need to expand savings opportunities.
But here's the problem -- Washington because they spent so much.
They have giant deficits and that encourages politicians then don't wanna raise taxes on wanna raise taxes and really -- -- ways so we need to expand the for a one -- and Roth IRAs and other savings incentives not cut them back.
Well at apparently the folks who came up with this brain child idea say that it's gonna give us some 458.
Billion dollars in additional.
Tax monies.
Really have sixteen trillion dollars in federal debt.
I mean it that's just you know not a lot of money not a lot of -- for really robbing Americans of incentives for saving for retirement.
Well not only that if you increase taxes on things that are good for growth like savings.
The economy ends up shrinking in the long -- and the government ends up getting less money so you know we need tax policy that helps the private economy win and then as a side effect the government whirlwind too because -- the economy won't spend.
-- -- is really how that works out.
Because when you put money aside in your 401K give it to some company out there you're investing and they ultimately can use that money to grow and expand -- That's exactly right -- the you know whether it's the middle income person are wealthy person.
They put -- they save their money tide goes -- financial institution then it goes back at the door to help some manufacturing company expand.
The manufacturing company expands hires workers so -- -- savings is good for workers it's good for everyone really so you know if we don't save enough in United States the problem and as we end -- borrowing a lot from the Chinese and Japanese and other people around the world reduce they have more.
And that creates all kinds of international.
Financing.
I just this year alone so this is up pot that gets bigger and bigger and bigger and Chris I can tell you there are a lot of people out there taking advantage of these new -- It was Barack -- days where they can pay the tax upfront and they're supposed to get the proceeds tax -- maybe not at this idea goes ahead I can't imagine how angry I would be.
If I was in -- situation of having paid this tax now and now looking at may be paying even more taxes.
Yeah I think you know we should expense savings and -- as I think we should expand Roth IRAs.
We have proposed in the past to -- and other people Washington to create universal Roth IRAs to increase the contribution limit.
For Roth IRAs and make it retirement for all purposes you can put money in for any purpose you can take money -- for any purpose.
Paneling free and that will encourage even more people ought to save and again that would be good for for every one.
I guess you know Chris at the end of the day it's if if I thought the federal government was spending my money well maybe -- -- maybe I consider this.
But you know -- got all these stories this week the GSA these agencies missed spending.
Our money in -- horrific way -- it's really just hard to take the idea that they want even more of it.
That that's exactly right and you know -- we have a whole website at Cato downsizing government dot org that goes through the whole government.
Tells politician's -- -- cut and the problem with raising any taxes is exactly what you said.
There's so much waste that is already going on in Washington it really is on just to raise taxes.
For any purpose saw in Washington until -- start cutting of the waste in the agencies that we don't need.
Chris thanks for coming on tonight I I you know it goes through I think we're all gonna have to flee the country it's ridiculous -- We appreciate your help tonight -- you.
