The Washington elites of both parties must think the American people are idiots. From my point of view, they are the idiots. Let me give you an example as to just how out of touch these people are. Most Americans are concerned about out-living their retirement money, as medical science is finding cures for more and more major illnesses. We now can cure HEP C, and who knows what deadly illness is next up to be cured? Every time a serious or fatal illness is cured, our life expectancy increases. As our lives lengthen, the greater the drain on our retirement assets, and the longer we live, the greater the chance our money will run out before we do.
Very few companies offer defined benefit pension plans to employees. At the federal level, the pension unfunded liabilities are in excess of $127 trillion dollars. State pension fund unfunded liabilities stand at $1.1 trillion. How is it possible for all this debt to be paid? The answer is it won’t. Most people understand that drastic changes will have to be made and many people will be hurt. The old idea of “saving for a rainy day” has been ignored by many people, and as a result, the savings rate has declined.
The constricted economy over the last 8 years has caused more and more wages to be spent rather than saved. With stagnant wage increases, it has been difficult for Americans to save. The private sector has developed savings plans like IRAs, Roth IRAs, and 401Ks among other plans to allow employees to build supplemental savings plans in addition to social security. Many Americans believe that social security will not be there when they retire. Other plans have been established to allow people to set aside some of their earnings in deferred compensation accounts to help them build retirement assets. According to the Bureau of Labor statistics, it is reported that in 64.4 percent of households, both spouses work outside the home. The possibility to set aside more money for retirement exists for these households. One area in which to build additional retirement assets, if their companies offer it, is a non-qualified deferred compensation plan.
Is deferred compensation better than a 401K? The answer is a qualified possibly. The money set aside in a 401K produces a tax deduction when the money is put in the account. It then grows tax deferred until age 70 and one half when some of the money must start to be withdrawn. At the time of withdrawal, the amount withdrawn will be fully taxable. In the case of deferred compensation, no tax deduction is given when the money is deposited and no taxes are paid when the deposit is made. The growth is tax deferred and then fully taxable when it comes out, which could be after 70 and one half, depending on the design of the plan.
Let me show you how your Congress works and you will better understand the headline of this article. Your Congress thinks because they say something, then nothing changes. The Congressional Budget Office (CBO) scores tax changes and tells Congress what are the tax implications of making a change in tax law. The CBO rationalizes if taxes are cut, a program will have to be cut or a new tax included in order to offset the tax cut so that the Congressional action will not increase the deficit. If Congress wants to cut middle class taxes by one trillion dollars over ten years, then they have to either cut spending by one trillion dollars or find other tax revenue to offset the tax cut. This is called being revenue neutral. The problem with this way of thinking is that the CBO makes the assumption that we as the taxpayers will remain static and make no change.
In the present proposed tax bill, Congress wants to eliminate the tax shelter of non-qualified deferred compensation and tax the deposit when the money is deposited into the account. The brains have made the assumption that people will not change their habits and they will continue to put money in the deferred account and pay the taxes up front. Therefore, they conclude that the Treasury will get the $1.5 trillion they need in order to make the tax cuts. I believe, however that taxpayers will find an alternative and look for other ways to reposition their deferred compensation money so as to put them in the same tax position.
What Congress hasn’t learned is that the American people are smart as or smarter than the elected leaders. The one thing the Congress hasn’t figured out is if they leave the deferred compensation provisions alone, they will get more than the $1.5 trillion in tax revenue they need. It is clear to me that the Congress wants to attack highly compensated senior executives of companies and non-profits by attacking their deferred compensation. What they are saying is that they want to penalize people who have been successful for a long period of time.
Corporations that offer deferred compensation plans, often offer them to younger employees in order to retain those people who have been very productive early on. This is done to try and build talent to run the company in future generations. If Congress is concerned about highly paid executives, what about these highly paid non-executives that have deferred compensation plans?
NBA: $6.2 million/per player/per year
MLB: $4.4 million/per player/per year
NHL: $2.9 million/per player/per year
NFL: $2.1 million/per player/per year
MLS: $309 thousand/per player/per year
We are a country that wants its citizens to grow and prosper through their talents and abilities. In this proposed tax bill, we now want to penalize those who succeed. If we want America to be great again, then our people have to work to achieve greatness, and when they do, they should not be penalized for their success. Contact your Congressman and Senators and tell them you are opposed to the tax bill and the taxation of non-qualified deferred compensation.
Dan Perkins is an author of both thrillers and children’s books. He appears on over 1,100 radio stations. Mr. Perkins appears regularly on international TV talk shows, he is current events commentator for seven blogs, and a philanthropist with his foundation for American veterans, Songs and Stories for Soldiers, Inc. More information about him, his writings, and other works are available on his website, DanPerkins.guru. To read more of his reports — Click Here Now.
© 2022 Newsmax. All rights reserved.