Our Enormous Retirement Subsidies for the Rich

In the State of the Union address, Obama revealed that he will be implementing a myRA plan, which is basically an Individual Retirement Account administered by the government. Savers will put the money in after-tax (like a Roth IRA), the accounts will be small (capped at $15,000), and the returns will be modest but guaranteed.

David Callahan had some preliminary coverage of the myRA idea and retirement security in general yesterday. The Economic Policy Institute also wrote on the plan, largely panning it as being inadequate. Indeed, it is hard to see how such a small account is meant to accomplish much or what this is supposed to do for low-income people who simply do not have any real money to put aside.

But before people start rattling off alternative account proposals that are much better, it behooves us to collectively recall just how much money the federal government is already devoting to subsidizing private retirement accounts. Those in policy circles tend to be aware of this stuff, but it largely escapes the glare of everyone else.

Each year, the federal government puts tax expenditures towards a whole slew of retirement instruments including defined benefit plans, 401(k)s, Keogh plans, traditional IRAs, and Roth IRAs. The Joint Committee on Taxation projects that in the five years between 2013 and 2017, spending on these subsidies will total over $700 billion. If we double that to do the 10-year budget thing everyone does for some reason, we wind up with $1.4 trillion of tax expenditures on just these subsidies.

Who captures these subsidies? The rich of course. According to the CBO, the following is who soaked up the tax expenditures dedicated to net pension contributions and earnings in 2013.

The richest fifth pulled down 66 percent of them, while the poorest fifth pulled down just 2 percent of them. So the richest quintile receives 33 times more federal money for their retirement accounts than the poorest quintile. Even the fourth quintile (incomes in the 60th to 80th percentiles) only received 18 percent of these tax expenditures. So all income groups other than the top fifth receive less than a proportional share of this money.

Needless to say, this system of retirement tax subsidies is totally ridiculous and is just another of the submerged ways that we funnel huge sums of money to the rich in this country. If we really want to pump up the retirement savings of the poor, one obvious way to start is to take the next decade's $1.4 trillion of retirement tax expenditures and distribute them in a different way than the manner detailed in the graph above.

Comments

The truth is that Obama is a puppet of the elite, rulers of this United States, they had expended trillions of Dollars to build and maintained in Washington an army of disloyal Americans, traitors that are the core of the Washington establishment, they are the ones that place their personal greed of money and power before our country's economic future and the people of this United states.
Fellow Americans, we have lost the White House, but we can win the Senate and the house of representative. This November is our chance to cleanup Washington and throw out all the corrupt politicians out of office. We must throw out all the career politicians Democrats and Republicans and replace them with statesman devote to service the American people, we need in Washington a new breed a political force, believers and defenders of our Constitution, people that will place our country before their personal interest, patriots that will stand for the truth and will expose the traitors of this United States, to we the people, so we be able to take action.
Fellow Americans, this economic crisis was self-made; if we fail to clean-up Washington of this corrupt establishment; we should blame ourselves and not one else for our own economic slavery and the demise of our country. For years we had fail to take responsibility for our civil duties, we fail to get inform and take action to clean up our country from this culture of corruption; today we are seeing the results and we are suffering the consequences. This country was built by people with character, believers in freedom and our Constitution. Do your duty and fight for the preservation of this United States. I am an American and I will continue fighting for what is right for America. My loyalty is to my country The United States of America, not to any politician, political party or organization. I will expose corruption on government and at the private sector; because corruption feed greed and greed will destroy humanity and our country.
God bless America and all the Patriots that keep doing what is right for our country.

For that to happen, people will need an entirely different attitude when voting. There are too many of us who can't see the handwriting on the wall and continue to vote ideology instead of pragmatism. Until we realize the mess we've allowed Washington to become and decide we've had enough, nothing will change. Too many people are like sheep when voting...they vote for someone who sounds good instead of doing their homework.

I think the sheeple received a very rude awakening when congress failed to extend unemployment benefits. When they actually started looking at Congress whom: receive an annual salary between $174,000 and $20xxxx in addition to the average annual expense account of over $1 million EACH, jaws dropped in disbelief. To add injury to insult, Congress is only required to work 11 days a month. Yes, folks, that's why they get a 2 week vacation every 2 weeks. Actually, they need it, as 55 of our elected representatives are in their 70's, 80's and yes, one is 90 years old. Certainly nothing against seniors..as I am one myself, but the thought of the huge responsibility that our representatives take on when elected.....I can not imagine doing that 20 or 30 years from now myself, nor can I imagine folks my parents age mentally handling that challenge. But that is our culture now, working until our mid 60's or 70. Whoa..hold on here...
I have worked since I was 16. I lost my job last year at age 54. After working for 38 years of my life, raising 3 children as a single Mom, purchasing my own home and learning how to maintain it myself, I do believe I'm am entitled to retire. Yes, at age 55 I am retired!! It amazes me how my ex-coworkers, friends and even family ask me, so have you found another job yet? NO, and I have no plans to either. I get a pension and have just been approved for medicaid, though because my income is unearned rather than earned, I only qualify for $15 in snap benefits a month. I've learned how to cook and eat cheaply, I miss my shopping outings, and come the 3rd week of the month I'm flat broke, but its a learning process and eventually I'll get it. But to be able to wake up when I want, and not being expected to lift 50 pounds of product in 95 degree weather...I'll take being poor any day vs going back to that. Why should we have to work until we drop? I for one, will not do it. . Thanks for reading..and letting me vent.

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