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Google exploits loophole to help employees evade taxes on $36,500 / year

10 points by resalisbury 8y ago

viridian 8y ago
I was sort of with the author until I got to the recommended policy change they want to see from legislators: "We should abolish all tax advantaged savings accounts. If the $158 billion in savings were then distributed evenly, every household could receive $1,250 per year and companies like Google would no longer pay HR tax specialists to exploit our tax code." The author appears to literally suggest we just take everyone's 401(k)s and IRAs for the year, give them away, and abolish the whole system. How is this a reasonable policy?
- resalisbury 8y ago
  author here :hi:, yes the policy section is a bit wishy washy and short on details. I think you would grandfather in existing accounts, but not allow additional contributions starting at some point in the future. edit: I've updated the article to add a little more detail to the policy recommendation.
- barbegal 8y ago
  Tax reduced savings accounts effectively flatten the tax curve because whilst they are available to everyone only those being paid more can effectively make use of them. On the other hand it does incentivice the higher paid to save more for the future rather than spending it now. This can save governments huge amounts when personal savings are used to pay for elderly care and medical treatment as opposed to the government.
tomohawk 8y ago
These are important tools for saving for retirement, and have enabled many people to build wealth. I know people who never made a lot of money in any given year, but used these tools to save money over decades, and they now can enjoy a good retirement. Calling these things loopholes, tax avoidance, or what have you is misguided and counterproductive. We already do not have pensions, taking away private pension options such as these would condemn many to not ever being able to be retired, or to poverty.
- resalisbury 8y ago
  Even if you don't abolish these, you could at least cap the total contribution (and even lift the annual contribution limit). A cap of $1.0 million per individual would allow for a safe withdrawal rate of approx. $40k / year (social security income would provide a further boost to that). You could move the cap higher or lower as you see fit. There are over 150,000 individuals w/ a 401k balance over $1.0 million; there is little social benefit in providing millionaires with even more in a tax advantaged savings. https://www.investors.com/etfs-and-funds/retirement/retirement-savings-more-americans-than-ever-have-1-million-or-more/ https://www.investors.com/etfs-and-funds/retirement/retireme...
  - cromwellian 8y ago
    $40k year is below the cost of living, or will be, in many regions. People also use 401ks for home loans, and for other lie events. I took a 401k loan to make the down payment on my first house. Most high income truly rich people aren't using 401ks for retirement, it seems to me that once again, people are going after the professionals who are squeezed in the middle, who already pay high tax rates because most of their income is wages -- doctors, lawyers, engineers, and avoiding the top 0.1% and others who amass vast returns and mostly avoid income taxes. Maybe we could try going after the big fish first before we start raiding retirement savings?

10 points by resalisbury 8y ago

I was sort of with the author until I got to the recommended policy change they want to see from legislators: "We should abolish all tax advantaged savings accounts. If the $158 billion in savings were then distributed evenly, every household could receive $1,250 per year and companies like Google would no longer pay HR tax specialists to exploit our tax code." The author appears to literally suggest we just take everyone's 401(k)s and IRAs for the year, give them away, and abolish the whole system. How is this a reasonable policy?

resalisbury 8y ago
author here :hi:, yes the policy section is a bit wishy washy and short on details. I think you would grandfather in existing accounts, but not allow additional contributions starting at some point in the future. edit: I've updated the article to add a little more detail to the policy recommendation.
barbegal 8y ago
Tax reduced savings accounts effectively flatten the tax curve because whilst they are available to everyone only those being paid more can effectively make use of them. On the other hand it does incentivice the higher paid to save more for the future rather than spending it now. This can save governments huge amounts when personal savings are used to pay for elderly care and medical treatment as opposed to the government.

tomohawk 8y ago

These are important tools for saving for retirement, and have enabled many people to build wealth. I know people who never made a lot of money in any given year, but used these tools to save money over decades, and they now can enjoy a good retirement. Calling these things loopholes, tax avoidance, or what have you is misguided and counterproductive. We already do not have pensions, taking away private pension options such as these would condemn many to not ever being able to be retired, or to poverty.

resalisbury 8y ago
Even if you don't abolish these, you could at least cap the total contribution (and even lift the annual contribution limit). A cap of $1.0 million per individual would allow for a safe withdrawal rate of approx. $40k / year (social security income would provide a further boost to that). You could move the cap higher or lower as you see fit. There are over 150,000 individuals w/ a 401k balance over $1.0 million; there is little social benefit in providing millionaires with even more in a tax advantaged savings. https://www.investors.com/etfs-and-funds/retirement/retirement-savings-more-americans-than-ever-have-1-million-or-more/ https://www.investors.com/etfs-and-funds/retirement/retireme...
- cromwellian 8y ago
  $40k year is below the cost of living, or will be, in many regions. People also use 401ks for home loans, and for other lie events. I took a 401k loan to make the down payment on my first house. Most high income truly rich people aren't using 401ks for retirement, it seems to me that once again, people are going after the professionals who are squeezed in the middle, who already pay high tax rates because most of their income is wages -- doctors, lawyers, engineers, and avoiding the top 0.1% and others who amass vast returns and mostly avoid income taxes. Maybe we could try going after the big fish first before we start raiding retirement savings?