401(k) Plans To Be Taxed To Pay For Bloated NJ Public Employee Benefits?
We’ve written on this topic so many times, it’s nice to see others in the blogosphere bringing this travesty to the attention of a wider audience. Bulldog Pundit at ABP writes:
Budget advisors for new NJ Governor Jon Corzine (sworn in last week) have raised the possibility of taxing private 401(k) retirement accounts to help close a $6 billion budget gap.
Nearly 20% of that amount is needed simply to keep state pensions solvent. As many of you know I've harped on the destructive policies of state defined benefit pension plans, and now the chickens, as they say, are coming home to roost. I wonder how NJ residents will feel having their private retirement accounts reduced simply to help pay for those of public employees?
Alexander K. McClure at PoliPundit weighs in on the topic with - The Path to a Republican Governor in NJ in 2010.
Just a few of our previous posts on the subject:
The High Cost of Public Employees
Public Employees Lecture New Jersey Taxpayers
Rutgers Report: New Jersey's Economy Lags Nation
The More They Waste, The More They Make
Codey: State Pensions, Benefits "Strangling" New Jersey Taxpayers
Posted by Enlighten-NewJersey @ 4:16 PM
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5 Comments:
Do they want to tax contributions or returns?
As brazen as the Trenton bureaucrats are getting nowadays, I would think a little of column A and a little of column B!
Codey was looking at proposals to tax contributions to 401(k) retirement plans, we would assume Corzine’s ‘advisors’ have the same idea in mind.
The next question is would it be legal. 401-K plans are requlated by the IRS. Anything that might lower participation in a plan, and removing the pretax contribution would do this, would have a serious impact on a business ability to be in compliance.
Any business that has a 401-K must supply the IRS with a form 5500 yearly. This form shows all of the employees that are elgible for the plan, whether they are highly compenstated or not and how much they contribute. If a company has too many highly compensated plans and not enough of the reqular employess the plan is called top-heavy and the business is out of compliance and the IRS may tax all contributions of participants if corrective action is not taken.
While lower paid employees have a chance to participate in a 401K plan it is in many case difficult or impossible for them to do so because of economic circumstances. Taking away one of the selling point, namely tax free contributions makes it even less attractive to them. The unintended consequence of taxing contributions and driving out the lower paid worker is that many small to mid-size companies will be forced to drop their 401K plan because it will be impossible to remain in compliance.
Once again the Democrats will hurt the very people they say that they stand for.
Turning New Jersey into a "beautiful liberal utopia" is an expensive job as we well know it would be.
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