The Grasshoppers Are Killing the Ants

It's beginning to look like "My Two Cents" is going to become an on-going series of reactions to the War On Personal Responsibility being waged in Washington.  First, it was increased health insurance premiums so your co-workers' 25-year old "kids" can be included on your company's plan, and so that those who absolutely cannot contain their urges can get free contraceptives and so that those with cirrhosis of the liver from excess drinking and lung cancer from smoking can be guaranteed coverage for their self-inflicted chronic conditions.  Then it was the use of tax dollars to keep people in houses they can't afford and never should have thought about buying.  Then it was new lower limits on Flex Accounts and increased taxes on Health Savings Accounts.

Now the next front will be opened on our retirement funds.  The American Society of Pension Professionals and Actuaries (doesn't that sound like a bunch of fun people to hang out with?) is out with a warning that the Fiscal Cliff agreement could include an end to the tax-exempt status of 401(k)'s.  http://www.cnbc.com/id/49976741

Currently, 401(k) contributions are pre-tax.  It was set up that way as an incentive for people to save for their own retirement--rather than depend on Social Security and Medicare to provide for their every need beyond the age of 65.  But the ASPPA fears (and rightfully so) that Democrats will take away that tax exempt status as it sees a giant pot of money available for "redistribution".  And we can pretty much assume that the tax code won't be changed to make the 401k) withdrawals in retirement tax-free, meaning that we will be DOUBLE TAXED on our contributions!  What's more, most 401(k) contributions are made during our periods of highest income, meaning we are paying the highest tax rates we'll ever pay--as opposed to the lower rates many of us will pay in retirement.

The unfortunate reality is that this "new revenue stream"--as this tax increase will be sold to us--still won't come close to offset the increased spending already approved in Washington--so Democrats will have to look for other options.  The next logical choice would be to end the tax-exemption on Roth IRA distributions.  Here is another giant pot of money just waiting to be "redistributed".  The logic will be "these are capital gains that aren't being taxed--and that's not 'fair'"  And with increased capital gains taxes already on the table from the Obama Administration, the incentive to put money away for the future becomes less and less powerful for every generation.

It's obvious that Aesop wasn't living in a period of Democratic control of government--otherwise his fable about the "Ant and the Grasshopper" would have finished with jackasses taking the food away from the Ants to "redistribute" to the Grasshoppers.