Democrats Take Aim At Investments and Savings

US News and World Report is reports in their article Why Democrats Will Target the Investor Class in 2009 that a Democrat run government will target a government take over of savings and investments for political expediency. It should be noted that the 'investor class' includes people who put thier savings in IRA's and 401K's. This isn't the super wealthy, this is most often responsible middle class Americans that save for retirement and other needs. This not only threatens people's savings it is more evidence that a government fully controlled by the Democrats will result in a dramatic lurch to the left as thes are plans for more big government control.

1) Hike Investment Taxes. Obama wants to raise capital gains taxes even though he has kinda, sorta admitted that it might be bad for the economy and might actually decrease tax revenue to the government. For now, he's talking about raising the highest cap gains rate by one third to 20 percent, though earlier in the campaign, he floated pushing it as high as 28 percent, a near doubling. (Recall that Democratic presidential contender John Edwards wanted to raise it as high as 40 percent, a move that was applauded by liberals who want investment income to be taxed as onerously as labor income.) With the next administration facing a trillion dollar budget deficit—maybe more—there will certainly be pressure to raise taxes to higher levels than now being suggested.

2) Eliminate 401(k)'s, IRAs, and other retirement plans. Democrats in the House are now talking openly about the longtime liberal dream of repealing the tax advantages of putting money into a 401(k) plan or other tax-advantaged retirement account. "The savings rate isn't going up for the investment of $80 billion [in 401(k) tax breaks], we have to start to think about whether or not we want to continue to invest that $80 billion for a policy that's not generating what we now say it should," said Rep. Jim McDermott, a Democrat from Washington at a recent hearing, according to an industry trade paper.

Indeed, House Democrats recently invited Teresa Ghilarducci, a professor at the New School of Social Research, to testify before a subcommittee on her idea to eliminate the preferential tax treatment of the popular retirement plans. In place of 401(k) plans, she would have workers transfer their dough into government-created "guaranteed retirement accounts" with a 3 percent real return.

Not only would removing the preferential tax treatment of these vehicles raise investment taxes by $100 billion a year and affect Americans making less than $100,000, it would surely prompt many Americans, already shell-shocked by the market's recent losses, to flee stocks. All this ignores the fact that there are trillions of dollars in American retirement accounts, and abandoning the higher-returning stock market at a probable bottom is classic financial foolishness. If you believe long term in the American economy, then you have to believe in the stock market. If you don't, then you have to admit the government won't be able to afford its promises anyway.

3) Replace private capital with public capital. But wouldn't a weak stock market hurt the economy by making it tougher to raise investment capital and lessen the return on risk? Surely, it would. But Obama is planning hundreds of billions of dollars of government "investment" in cutting-edge technology, particularly in the energy and healthcare sectors. One specific example: Obama wants to create something called a "Clean Technologies Venture Capital Fund" and invest $10 billion a year in emerging energy technologies. Now, the private VC industry is already pouring billions into alternative energy, but Obama thinks that's not enough and wants Uncle Sam to get in on the action at taxpayer expense. Interestingly, a new study by the University of British Columbia looked at the performance of the Canadian government's venture capital efforts. It found that government venture capital isn't nearly as successful as private venture capital.

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Democrats Take Aim At Investments and Savings

Democrats Discuss Taking Over People's 401K's

If you don't think an Obama, Pelosi, Reid run government would result in a dramatic swing to the left, read US News and World Reports article on congress' discussion of takng over people's 401K's. 401K's are not 'rich people' savings plans they are middle America's retirement and savings plans, and Dems are looking to make them into 'government created' accounts. Would Obama, Dems Kill 401(k) Plans?

I hate to use the "S" word, but the American government would never do something as, well, socialist as seize private pension funds, right? This is exactly what cash-strapped Argentina just did in the name of protecting workers' retirement accounts (Efharisto, Fausta's Blog). Now, even Uncle Sam isn't that stupid, but some Democrats might try something almost as loopy: kill 401(k) plans.

House Democrats recently invited Teresa Ghilarducci, a professor at the New School of Social Research, to testify before a subcommittee on her idea to eliminate the preferential tax treatment of the popular retirement plans. In place of 401(k) plans, she would have workers transfer their dough into government-created "guaranteed retirement accounts" for every worker. The government would deposit $600 (inflation indexed) every year into the GRAs. Each worker would also have to save 5 percent of pay into the accounts, to which the government would pay a measly 3 percent return. Rep. Jim McDermott, a Democrat from Washington and chairman of the House Ways and Means Committee's Subcommittee on Income Security and Family Support, said that since "the savings rate isn't going up for the investment of $80 billion [in 401(k) tax breaks], we have to start to think about whether or not we want to continue to invest that $80 billion for a policy that's not generating what we now say it should."

Hat Tip to Smart Girl Politics original article Kiss Your 401k Goodbye!

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Democrats Discuss Taking Over People's 401K's

Obama's Tax Plan and Income Redistribution Hurts the Economy and the Middle Class

Senator Obama's tax plan is packaged as tax cuts for the middle class when in reality there are numerous tax increases on the middle class and on small business owners. Senator Obama's tax policies are similar to those of Herbert Hoover who raised taxes, implement isolationist policies, and drove the American economy into a massive depression. Senator Obama claims that his tax policies that give a government check to people not paying anything in income taxes are done in the name of fairness. However, the economic depression that his policies would likely trigger is fair to no one. Investor's Business Daily lays out the problems with the Obama 'spread the wealth' tax plan in their article Investors Flee From 'Change' Obama Hypes

These tax credits are devised to phase-out based on income, which will ultimately increase marginal income tax rates for middle-class workers. In other words, as you earn more, you suffer a penalty in the phase-out of these credits, which has the exact effect of a marginal tax rate increase. That harms, rather than improves, the economy.

With the bottom 40% of income earners not paying any federal income taxes, such tax credits would not reduce any tax liability for these workers. Instead, since they're refundable, they would involve new checks from the federal government.

These are not tax cuts as Obama is promising. They are new government spending programs buried in the tax code and estimated to cost $1.3 trillion over 10 years.

Obama argues that while these workers do not pay income taxes, they do pay payroll taxes. True, but his planned credits do not involve cuts in payroll taxes. They are refundable income tax credits designed to redistribute income and "spread the wealth."

Meantime, Obama has proposed effective tax increases of 20% or more in the two top income-tax rates, phasing out the personal exemptions and all itemized deductions for top earners, as well as raising their tax rates.

He wants a 33% increase in the tax rates on capital gains and dividends, an increase of 16% to 32% in the top payroll tax rate, reinstatement of the death tax with a 45% top rate, and a new payroll tax on employers estimated at 7% to help finance his health insurance plan. He's also contending for higher tariffs under his protectionist policies.

Finally, he would increase corporate taxes by 25%, though American businesses already face the second-highest marginal tax rates in the industrialized world, thus directly harming manufacturing and job creation while weakening demand for the dollar.

Obama argues disingenuously that his tax increases would only affect higher-income workers and "corporate fat cats." But it is precisely these top marginal tax rates that control incentives for savings, investment, entrepreneurship, business expansion, jobs and economic growth. While he wants to tax the rich, the burden will fall on the poor and the middle class.

Obama's Tax Plan and Income Redistribution Hurts the Economy and the Middle Class