Government To Confiscate 401(k)s and IRAs For Mandatory Savings Tax?

Proposals to implement additional form of income tax while seizing private pensions raised in Congress. Under the pretext of combating the financial crisis, Democrats in Congress have been conducting hearings on proposals to confiscate private retirement accounts and turn them into government-controlled accounts managed by the Social Security Administration, by implementing a new tax in the guise of mandatory savings scheme.

Teresa Ghilarducci, professor of economic policy analysis at the New School for Social Research in New York, testified before Congress last month, proposing that 401(k)s and IRAs be confiscated and converted into universal Guaranteed Retirement Accounts (GRAs) managed by the Social Security Administration.

The GRAs would be enforced by means of a mandatory savings tax equating to 5 per cent of an individual’s annual paycheck deposited to the GRA. Social Security and Medicare taxes would still be payable, employers would no longer would be able to write off their contributions and capital gains would be taxable year-on-year. In addition, workers could bequeath only half of their account balances to their heirs, unlike full balances from existing 401(k) and IRA accounts.

Unfortunately, as we have again painfully learned in light of the Federal Reserve’s refusal to identify where $2 trillion of taxpayers’ money has gone, governments that propose “spreading the wealth” under socialist-style financial reforms almost always collect the wealth under the pretext of being the saviors before greedily hoarding it all for themselves.

Social Security is not the mandatory retirement savings plan it was sold as to the American people. It is simply another tax. Ghilarducci admits the bait and switch in one breath and in the other proposes the next bait and switch. Except, this time it will be different.” Would the government risk a widespread revolt and potential riots by confiscating 401(k)s and IRAs? They probably wouldn’t brazenly do it under that banner, but in the name of financial reform and saving the economy, Americans could find their voluntary retirement savings stolen and replaced by a government promise of a completely devalued mandatory savings account.

Argentina has already vowed to push through similar measures in the name of rescuing the wider financial system. Last month, the government of the South American country signed a bill to mandate the National Social Security Administration takeover of $30 billion worth of private pensions.