Wednesday, April 17, 2013
Amity Schlaes warns of a phenomenon she calls "tax grope":
Citizens have resigned themselves to the new rates, official and public, that will apply this year to long-agreed-upon definitions of taxable income. Traditional income is fair game.And from which unexpected directions and at which unexpected force will these blows come? Here's just one example, from Barack Obama's budget: The government is getting ready to go after retirement accounts.
The taxpayer is alert, though, to something else: future arbitrary impingement by a tax authority in an unexpected way. Sometimes the intrusion comes from an expected party, more uncomfortable and irritating than fatal. But sometimes, the intrusion shocks either by its scale or because it comes as a total surprise. [link dropped]
Page 18 of the budget suggests that an IRA or 401(k) ample enough to provide pensions of more than $205,000 a year is too high. New penalties apply to money in the plan exceeding a "maximum permitted accumulation." This reduces whatever benefit was there from compounding. The suggested limit on such savings would be $3 million.Such caprice on the part of government officials has always been a danger inherent in the premise that your pocket is the government's to pick, but we have not experienced the problem on a massive scale, yet. Whether this is because of the remnants of our heritage as a society that respected property rights, in the form of custom, or perhaps simply because there has not yet been a big enough crisis to make the government feel like it could get away with it so far does not matter. In any event, the threat of non-objective "law" which Ayn Rand long ago identified as the evil inherent in anti-trust law, is about to be visited upon individual Americans. This is obscene.
Still these lines should chill even citizens whose 401(k)s fall short of that amount. After all, authorities could lower the limit later, as happened with the erstwhile rich-man's levy, the alternative minimum tax. [bold added]
As bad for individual planning and the economy as taxation is, at least it has been predictable. Ms. Schlaes shouldn't have bothered explaining the tame historical pedigree of the phrase "tax grope": Leaving it up to the imaginations of her readers, however sordid, would have done better justice to Barack Obama and his plans.