FBN's Stuart Varney hyped a new conspiracy to explain the horrible proposal to tax 401k contributions. According to Varney, whoever told the press that House Republicans were considering a plan to cut contributions to 401k's was only trying to hurt Trump's tax cuts and make it look like it's not going to help the middle class.
Methinks Varney sees unicorns under his bed, too!
The host of Varney & Co. opened up his show by delving into a report that Republicans were possibly going to limit 401k contributions to a maximum of $2.400 a year, with any excess made after taxes were withheld.*
Varney said, "In case you were worried about all of this talk of reining in your 401k, President Trump sent out a tweet earlier this morning, 'There will be NO change to 401(k), middle-class break and it stays. This has always been a a great and popular middle class tax break that works and it stays!'
Varney then introduced former Reagan economist Art Laffer, "I'm sure you're very pleased that they're not going to rein in the 401k."
Varney was juiced up this morning. "I'll go further. I think that was a deliberate leak by somebody who wants to bring down the tax plan and wants to show that it's not for the middle class, that's what I think."
Art Laffer agreed that it could well be true!
401k's are not a tax cut or a tax break. They are a tax deferment. A person pays taxes on the money when they draw on them.
The ideas that have come forward so far during Trump's push for
tax cuts for the wealthy, I mean "tax reform," have been all about cutting taxes on the rich and gutting corporate taxes. There hasn't been any effort to show how these would be paid for except of course to to take money away from the middle class.
The NY Times reported, "Reducing contribution limits would be, in effect, an accounting maneuver that would create space for tax cuts by collecting tax revenue now instead of in the future.Such a move would be likely to push Americans to shift their savings to so-called Roth accounts, where contributions are taxed immediately, and not when they are drawn out as benefits. That would increase federal tax receipts for the short run."
Art Laffer and Varney then giggled throughout the segment about how cutting taxes will most definitely stimulate the economy, citing stock market gains as proof.
And then they exposed the big con that's always been the case. No matter what tax rates are, the wealthy always get around paying their taxes. Loopholes are always there for the taking.
Varney whined that rushing to give the middle class tax breaks means the rich would have to keep paying "a whole lot of money," which would make the tax reform bill not very stimulative.
Stuart, any bill Republicans put out will not be stimulative anyway. Tax bills aren't effective economic stimuli. Infrastructure bills are.
Laffer then spilled the beans. "No, it's not and they don't pay the money anyway. They use shelters. Warren Buffet, I had a piece in the WSJ on his 2010 tax bill. He doesn't pay any taxes compared to his total income. It's very low because he has unrealized capital gains, he has deductions for charitable contributions, he gives his money to his family foundations, Gates Foundations...'"
If the wealthy don't pay taxes like Varney says they do then how can a tax reform bill stimulate the economy?
Laffer isn't happy that upper middle class people might have to pay more in taxes, but so be it.
Duncan Black writes, "Middle class tax deductions (401k, mortgage interest) mostly benefit higher income people but better them than the 1%. If you want to give super rich people a massive tax cut, and pretend to "pay" for it a little bit, the money has to come from somewhere, and the only place it can come from is upper middle class people."
*Editor's note: They've already done this with IRAs. Whenever tax cuts are contemplated, they look to find offsets inside of retirement plan or health insurance tax preferences.