Killing the Goose That Lays The Golden Eggs - And All of Its Descendants

(expletive) unbelievable. Or rather, should I say, all too believable: House Democrats Contemplate Abolishing 401(k) Tax Breaks

Words fail, but I'm going to try anyway: Do you have any idea how much of a difference for the worse it will make for the economy? Do you have any idea how much it will hurt the retirements of the "working class" folks they say they are trying to help? For the economy, about the size of the mortgage meltdown bailout every year, while restricting our economic growth rate by at least a third. For the 401k, do the math with a 28% yearly drain on contributions and income within the account, and over a 40 year working lifetime, it cuts the size of the nest egg by a much larger factor than the tax rate.

It is the fact that this money currently accumulates tax deferred which is the biggest reason why it is a good investment. The company match is actually number two. Let's say you contribute $1000 per year. If you contribute multiple thousands, just multiply the results by however many times you contribute $1000. If you get an 8% compounded rate of return, this will cut the size of the nest egg from $281,000 per thousand per year, to $112,000 - sixty percent of the money just gone, and seventy percent of the actual increase in value (you would have $40,000 even if you put it in a mattress). And here's the sick part: For costing you $169,000, the government only collects $43,000 in taxes! If they just waited until you start withdrawing, at the end of your career, they'd get close to $79,000 at the same tax rate! Is this brain damaged or what?

Don't believe me? It's pretty trivial to program in the spreadsheet of your choice.

Change the assumption to a 10% rate of return (very achievable), and instead of $488,000 times however many thousands of dollars you contribute, you only have $163,000 as the multiplier, and the government only collected $63,000 in taxes, as opposed to over $136,000 if they just waited.

Admittedly, there's also Time Value of Money calculations to make, but this is just so unbelievably stupid that I had to check my calendar and the date stamp to make certain it wasn't an April Fools Day joke taken out of context. This is lose-lose-lose by any measure - unless your only criteria for "benefit" is "the government gets your money now"