"White Men" Alert!

Senator Sherrod Brown (D-OH) writes:

This Spring, one of the chief architects of failed trickle-down economics, Martin Feldstein, let the cat out of the bag. On the Wall Street Journal Opinion page he laid out in detail how Washington Republican elites plan to pay for so-called tax reform: with massive cuts to Social Security and Medicare.

Brown's link goes to an article behind the WSJ paywall, but the headline reads:

Balancing Lost Tax Revenue the Reagan Way: Gradually increasing the Social Security eligibility age can offset revenue loss from Trump’s tax cuts.

Now, while raising the retirement age, a perennial favorite of policy wonks spending their working lives in air-conditioned office buildings, could be said to decrease lifetime social security benefits when we assume fewer remaining years of eligibility, it probably isn't what most readers assume by "massive cuts". But then, "raising the retirement age" doesn't sound as scary.

Brown continues:

Now the latest proposal they’ve floated would take away the freedom Americans have to choose the retirement savings plan that works best for them and force everyone into a Roth account – slapping taxes on the retirement savings of working, middle class families.

You’ve got to be kidding me: their two best ideas to pay for massive tax cuts for Wall Street are to slash Social Security and then steal from the retirement accounts of working, middle class Americans.

Not if I have anything to say about it.

Brown links to a WaPo editorial, which links to Politico:

In addition to the revenue raisers such as eliminating the deduction for state and local taxes — a benefit that disproportionately hits taxpayers in high-cost states like California, New York, New Jersey and Massachusetts — the tax negotiators are scouring former Republican Rep. Dave Camp’s 2014 tax plan for other ideas.

One idea quietly being discussed would be taxing the money that workers place into their 401(k) savings plans up front: an idea that would raise billions of dollars in the short-term and is pulled from the Camp plan. This policy idea is widely disliked by budget hawks, who consider it a gimmick; the financial services industry that handles retirement savings; and nonprofits that try to encourage Americans to save.

In other words, Senator Brown is telling two separate lies. First, the proposal has nothing to do with IRAs; both Traditional and Roth IRAs will remain available. The proposal concerns taxing employer-sponsored 401K plans like Roth IRAs rather than Trad IRAs. And second, workers do not now "choose" their 401K taxation rules as they do for IRAs: all 401K plans are taxed at withdrawal.

Now, with the stipulation that this proposal is pretty dumb, I want to point out that (a) ideas that are only being "quietly discussed" seldom make it into final legislation, and (b) such legislation wouldn't "steal" anything. It wouldn't even "slap taxes" on anything. It would merely move the point of taxation from the distribution to the contribution. Hell, depending on the assumptions, such a move might even reduce the taxes paid; certainly that's how most financial planners model Trad vs. Roth IRAs.

Brown finishes with a flourish:

If President Trump and Congressional Republicans want to work together with us to build a tax code that puts more money in the pockets of working families and small businesses – and rewards employers that keep jobs in the U.S., Democrats are ready and willing to work with them to get it done.

But if Senator McConnell follows the model of healthcare – where a handful of white men met in back rooms to write a bill designed by special interests lobbyist – he’s going to have one hell of a fight on his hands. [Emphasis added.]

Um . . . "white men"? Putting aside Brown's déclassé racial trolling, what does this have to do with proposed changes to the taxability of 401K plans? I googled "401K participation by race", and the first non-pdf link had this paragraph:

The results of the study reveal that — even after controlling for factors such as age, salary, and job tenure — quantifiable differences are clear across race and ethnicity in how successfully 401(k) plans are used. In general, we found that African-American and Hispanic workers have lower participation rates and contribute less to their 401(k) plans than their white and Asian counterparts. They are also more likely to have a loan and/or take a hardship withdrawal. As a result, the 401(k) account balances for these workers are negatively impacted and chances for a comfortable retirement significantly compromised.

So, basically, even (or especially) if Brown's characterization of these proposals were correct, they would necessarily impact white workers more than black workers!

Apparently, the tendency among Democrat politicians to use of "white men" as an all-purpose negative intensifier is growing.