I predicted a few years ago that our
broke national government was eventually going to confiscate tax-deferred
retirement plans, such as 401(k) plans and Individual Retirement Accounts
Well, the groundwork is being laid to do
just that. Useful leftists in academia are making the philosophical and
revenue cases for the confiscation, or I should say, have put intellectual rot
on hooks for the gullible and amoral media and masses to swallow. In fact,
Time Magazine already has taken the bait.
You can expect a concerted effort from
the usual suspects to win over the media and masses with relentless
brainwashing, conditioning, and agitating. And you can expect Republicans to
stay in their default position of defense instead of going on offense and going
for the jugular as Democrats do.
Let’s play along with the left’s charade
that this issue is about something other than stealing money from those who
have it and giving it to those who have squandered it--that it is about
fairness, not stealing.
Before turning to their smokescreen
arguments, please let me explain why I’m qualified to discuss this subject: Of
my many responsibilities over my corporate career, one was overseeing employee
benefits, including 401(k) plans, for tens of thousands of employees.
I eventually quit the lucrative career
because of being conflicted over what I was doing. I had to go along with the
lie that the government is doing a favor for employees by letting them defer
taxes on a small part of their savings. Actually, the government is doing harm
to employees (and to the nation) by taxing their savings at all. Citizens
shouldn’t have to pay a penalty to save for retirement and not be a burden on
society, especially when savings are necessary for investments in plant,
equipment, and new jobs. Moreover, because of the administrative and
regulatory complexities of 401(k) plans, investment returns are lower than they
would otherwise be, due to fees for administration and legal and tax advice. A
big chunk of those fees go to Republicans who rant about big government while
having their snouts buried in the rancid regulatory pork from 401(k) plans.
One of the left’s arguments is that the
wealthiest 20% of the population has 80% of the money that is in IRAs and
401(k) plans. Assuming this is factual, there are two fallacies with the
First, 401(k) plans have to pass a
so-called discrimination test. This means that there has to be a proportional
participation of higher- and lower-paid employees in the plans. If a company
doesn’t pass the test, high-paid employees are restricted in their
This test forced me to get involved in
employees’ personal lives. I had to implore and cajole lower-paid employees to
participate in the plans and not pass up the free money of the employer’s
matching contribution. Sometimes this entailed asking higher-paid employees to
reduce the amount they wanted to put in their accounts. Either way, I was a
pain in the ass.
Almost all of the employees who didn’t
participate in the plans, even the lower-paid ones who didn’t participate, had
some reason other than needing the money for living expenses. They weren’t so
low-paid and so struggling financially that they couldn’t afford to contribute
to the plans and save for retirement. They simply had no self-restraint and no
long-term outlook. They preferred to spend the money on non-essentials, such
as sporting events and concerts, lunches at expensive restaurants, cigarettes
and booze, and cars that were fancier than necessary.
Personal anecdote: In 1980, as a
corporate vice president, I bought a new Toyota Corolla for $5,777 (I still
have the receipt). It had a stick shift, roll-down windows, and such a puny
engine that the air-conditioner wouldn’t cool the passenger cabin in the summer
heat of Phoenix.
I drove the car for 20 years. For a time, a fellow employee would park his
big, fancy and expensive BMW next to me. A lower-level salesman, he was a
high-roller with a Rolex watch, Armani suits, a high-maintenance wife, and a
lot of debt from trips to Vegas and exotic locales. One day he came to me and
requested a hardship withdrawal from his 401(k) plan, ostensibly for a
down-payment on a new house, which was allowed under IRS rules at the time. He
used the proceeds to buy a new BMW and used other money for the down-payment.
No doubt, he has no retirement savings
today and isn’t worried about the government confiscating 401(k) plans. He may
even be hoping for it, because he might get some of the stolen loot.
Which brings me to the second fallacy of
the left--namely, that people have retirement savings because they are rich.
Actually, the opposite is true: people are rich because they saved money all
their lives. Virtually all of the “rich” people I have known over the years
got that way by living below their means, having a long-term outlook,
exercising self-restraint, investing in their future, and not caring about
There is nothing fair about taking their savings. Of course, as I said at the beginning, fairness has nothing to do with the left wanting their money.
Mencken’s Ghost is the nom de plume of an Arizona writer who can be reached at email@example.com.