alt Hacker NewsIt’s far-fetched for a number of reasons:
1. It upsets the most influential voting demographics. I struggle to find any national policy implemented in the last few decades that has truly disrupted the kind of upper middle class voter that has a lot of money in a 401k.
2. If you tax 401ks higher than long term capital gains tax then higher earners just won’t use 401ks/IRAs.
3. 401ks and IRAs are completely detached from the way social security is funded so they aren’t even really the most logical place you would go to fund social security. E.g., why not just raise the social security payroll tax?
5. It’s less logical to do this than to remove the social security tax cap.
> I struggle to find any national policy implemented in the last few decades that has truly disrupted the kind of upper middle class voter that has a lot of money in a 401k.
Capping SALT deductions was a big one. For upper middle class folks in HCOL cities this is tens of thousands of dollars of additional taxes being paid.
> If you tax 401ks higher than long term capital gains tax then higher earners just won’t use 401ks/IRAs.
How does that help those who funded a 401k/IRA during their working career? Sure, new earners won't use them but that doesn't help you very much if you're retired. I also don't think it would be more than long term capital gains, it would first start as a very small "reasonable" tax on the top "rich folks" accounts and slide upwards from there like nearly all taxes do.
Totally agree on points 3 and 5, but I absolutely expect my tax advantaged retirement accounts to become less advantaged than they are today by the time I'm drawing on them. You have to collect revenue from where the money is, and with all the talk about "wealth taxes" I predict will eventually hit 401k/IRA accounts as well. I bet it will be politically very popular to add a 5% tax on withdrawals from "millionaire" retirement accounts. Most folks have very little concern over the upper middle classes $3m brokerage account being taxed regardless of account type.