In tomorrow nights State of the Union speech, President Obama is supposed to announce his latest gimmee, two years of free community college for whomever wants it. Aside from the fact that this will cause community colleges to raise their tuition and fees dramatically ('hey, the government's paying!') just like most 4 year institutions, there's the question of how the Feds are going to pay for this.
Do I really need to tell you that the president plans to screw the middle class again? Over the holiday weekend, when no one was paying attention, the White House leaked its new plan for $320 billion in new taxes including a major capital gains hike (particularly immoral since this money has already been taxed once as income) and a 20% increase in the death tax rate. But wait,there's more:
A new 7 basis point (0.07%) tax on the liabilities (not assets) of the 100 or so U.S. firms with assets over $50 billion. This will obviously be passed along to these firms' customers and employees, since businesses don't pay taxes--people do.
There would be a new cap in the amount one could accumulate in the aggregate in all IRA and 401(k) type accounts of $3.4 million. After that, you can't save any more new dollars. The idea is that this is enough to secure a $210,000 annual distribution in retirement, which the government apparently deems "enough" for a retiree.
So of course, no real incentive to save, as well as no accounting for inflation.
And of course, if you're an ex-president $210,00 isn't deemed to be nearly enough. Then your pension is $200,000, but it is the same the salary of a Cabinet secretary and geared to inflation..so it rises accordingly. And that's without figuring in free medical care , Secret Service protection, and reimbursements for staff, travel, mail, and office expenses for life.
And then there's this gem. A number of families have been taking advantage of what are called 529 plans, in order to save money for their children's college education. Under the current law, 529 plans work a lot like Roth IRAs: you put money in, the money grows tax-free for college and withdrawals and distributions are tax-free provided they are to pay for college. So that encourages people to save for their children's education.
Ah, but now this president wants to extend hope and change to this area. Under the Obama plan, earnings growth in a 529 plan would no longer be tax-free. Instead, earnings would face taxation upon withdrawal, even if the withdrawal is to pay for college.
So what we have is yet another instance of the government changing the rules once people have already committed their money to these plans... to rob the productive and thrifty who have sacrificed for their children's education in order to 'redistribute' this money to those who couldn't be bothered.
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