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How much money is invested in tax deferred accounts in the USA?

2,459 Views | 15 Replies | Last: 3 yr ago by Ribeye-Rare
harrierdoc
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What if our government decided to cancel that opportunity and charge a one time 28% tax charge. How much money would be garnered by that decision?
Pepper Brooks
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Enough to guarantee work for attorneys for the next 10 years and to guarantee one term to the person who signs off on it.

A one time "tax"(theft) would enrage the entire working middle class.
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one MEEN Ag
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The Pandora's box is the money printer. Why tax the middle class like that? Just print more money to cover a budget shortfall and steal through inflation.

And for the government, there's no such thing as 'one time' or 'temporary.'
AFarmer95
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a more likely thing to happen is say that every tax deferred retirement account has to hold say 10% of US debt in it to maintain tax deferred status. That would keep US debt low forever, maybe....
Stive
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Man...this election has brought out some hilarious tax change fear mongering.
A New Hope
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Taxing wealth WILL happen in this country. Mark it down.
Stive
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Fedup said:

Taxing wealth WILL happen in this country. Mark it down.

So something that's already happening and has been happening pretty much since taxes began being used in this country is going to continue happening into the future? Solid prediction!


There are comments/fears on the estate tax thread about congress changing the tax code retro active back to 2020 (not happening), I had a client several months back remove all of their funds from tax sheltered accounts, pay the taxes on those funds, and buy physical gold because they were convinced that the dems were going to move us to "one world currency" before the year end (this was months before the election mind you), and now this thread about them basically blowing up one of the programs that's most advantageous to the middle class and working class.

There will be changes to the tax code (there always have been), the rich will continue to be taxed (as they always have), and there will continue to be loop holes and creative positions that will evolve to better position assets to take advantage of the changes. Additionally, in almost every tax code change, there has been time to make the adjustments needed before the new rules are in place, and/or things are grandfathered in. It never plays out perfectly, but virtually no one here is going to wake up on a Monday morning and half of their asset base be gone due to Nancy Pelosi.
Fightin_Aggie
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Stive said:

Man...this election has brought out some hilarious tax change fear mongering.
Have you read or listened to anything the dumbocrats have said they want to do?

They freaking guaranteed to raise taxes
The world needs mean tweets

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Stive
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Where, in either of my posts, did I say that democrats weren't going to raise taxes?
HalifaxAg
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...a lot less in four years time
harrierdoc
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1. I've thought about this for years. It has nothing to do with the recent election, but rather, the path our country is taking. When cultural and economic upheaval and uprisings occur, those with wealth are the first to have everything taken away and, not unheard of, killed.
2. I don't think our country would be that drastic, but to confiscate money that is just sitting there, to redistribute to the masses (ie, keep for the power brokers), doesn't seem that unrealistic.
3. I didn't want this to go to a political discussion, but was just wondering the numbers and couldn't find them on a cursory internet search.

So, anyone have any idea about the answer to my question?
ABATTBQ11
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No idea, but the US retirement market is roughly $31 trillion dollars. Some of that may or may not be tax deferred, but assume a healthy portion of it tax advantaged in some way (think Roth vs traditional 401k deferment).

Considering the federal government spends a few trillion per year, it wouldn't require a huge haircut to seriously boost spending, but even a small amount would be political suicide. However, it would likely be incredibly difficult to make it constitutional.

Any direct tax on property, which a tax on retirement assets would undoubtedly be, must be apportioned among the states according to population, so the tax amount raised would need to be apportioned in the same way House members are. They'd also have to uniformly tax, so one state's residents can't be taxed at a higher rate than others.

This creates a Catch 22 on taxing wealth. Tax a rich and poor state uniformly at the same rates, and you probably violate apportionment. Tax them at different rates to meet apportionment and you violate uniformity.


The only way around it would be to tax income from retirement accounts somehow differently than normal income. Again, political suicide, and it's robbing Peter to pay Paul.
harrierdoc
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Thanks for that thoughtful response.
Chamonix
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Stive said:

Man...this election has brought out some hilarious tax change fear mongering.


It's not the election as much as half of the party. We have major party leaders saying the rich need to be taxed to equity. That's not fear mongering when you have elected politicians saying it
ABATTBQ11
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harrierdoc said:

Thanks for that thoughtful response.


YW. Hopefully that answers the underlying question.
OldArmyBrent
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ABATTBQ11 said:

No idea, but the US retirement market is roughly $31 trillion dollars. Some of that may or may not be tax deferred, but assume a healthy portion of it tax advantaged in some way (think Roth vs traditional 401k deferment).

Considering the federal government spends a few trillion per year, it wouldn't require a huge haircut to seriously boost spending, but even a small amount would be political suicide. However, it would likely be incredibly difficult to make it constitutional.

Any direct tax on property, which a tax on retirement assets would undoubtedly be, must be apportioned among the states according to population, so the tax amount raised would need to be apportioned in the same way House members are. They'd also have to uniformly tax, so one state's residents can't be taxed at a higher rate than others.

This creates a Catch 22 on taxing wealth. Tax a rich and poor state uniformly at the same rates, and you probably violate apportionment. Tax them at different rates to meet apportionment and you violate uniformity.


The only way around it would be to tax income from retirement accounts somehow differently than normal income. Again, political suicide, and it's robbing Peter to pay Paul.

Agree that it should be political suicide, but there are other ways to tax the value of retirement assets. For example, require distributions from traditional 401(k) accounts. Those are taxable at ordinary rates, but maybe they'll allow you to convert it to a Roth instead. Still taxable. Lots of ways though I think to thread the constitutionality needle.
Ribeye-Rare
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Fightin_Aggie said:

Stive said:

Man...this election has brought out some hilarious tax change fear mongering.
Have you read or listened to anything the dumbocrats have said they want to do?

They freaking guaranteed to raise taxes
This, particularly if the devil goes down to Georgia and gives us two more Democrat senators.

My concern is not that which OP posited concerning retirement accounts, but rather the Democrats' stated desire to increase capital gains rates, if not their status itself.

Many make a significant part of their livings not by a 'normal' compartmentalized year-to-year earnings model. Some projects can take several years to achieve ripeness, at which time you finally get paid.

Since there no longer exists income averaging in the tax code, those larger paydays could, without capital gains treatment, get taxed at maximum rates. Yes, there are installment sales and like-kind swaps and C corps, but those aren't always the route you can follow.

Most capital gains (in larger transactions) are already hit with the 3.8% NIIT, so total rates aren't as low as some folks make them out to be.

My hope (and I apologize for injecting politics) is that enough Democrats, while talking a good game in front of the cameras, have their own big moneyed constituents who make and maintain their fortunes via 'investments' and they won't risk doing much more than window dressing.

I suppose we'll see.
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