Currently, contributions to 401k or equivalent are “pre-tax”, directly reducing taxable income in the US. The deduction reduces taxes at a person’s highest marginal tax rate.

The Bıdɛn administration claims this deduction benefits high income earners more than low income earners. (That is, someone at a 37% tax rate gets 37% benefit, while someone at a 12% tax rate only gets 12% benefit.) They are proposing changing the deduction to a fixed 26% tax credit for everyone. A 26% credit benefits anyone with a marginal tax rate below about 20.6% but hurts those with higher marginal tax rates. (And so creates some incentive for high income earneers to use a Roth IRA instead but that’s a different issue).

It wouldn’t be much of a stretch to call this a wealth redistribution.

The argument also neglects two key benefits that already exist for low income earners:
– A low tax rate makes after-tax Roth contributions very attractive
– Low income earners (up to about $33k single or $66k married in 2021) can get the Retirement Savers Credit, which is on top of the other tax benefits of IRA/Roth.

Doesn’t affect me. I don’t participate in gambling. The House always wins.

Unless you are part of the Elite, you will never know when to buy and sell stocks. Best to avoid such gambling altogether.

If you already have zero debt, some free-and-clear land with buildings, and plenty of supplies: food producing equipment, tools, preps — then put your remaining excess wealth into PHYSICAL gold and/or silver.

Most of us don’t get to that stage — having excess wealth, I mean.

This content was originally published here.

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