Barack Obama

Hey Obama: Don't Tell Us It's Raining While You Soak Middle-Class Savings!

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In USA Today, Glenn Reynolds of Instapundt explains one of the most predictable and awful political plays that always happens when government needs more money: Taxing the middle class.

Of course, the government—in this case, President Obama—never puts it that way. It's always talking about going after the Thurston Howells and Richie Riches of the world. But when it rains on the wealthy, the middle class get soaked, because they ultimately have the sorts of assests and savings that can actually be taxed en masse. In his State of the Union Address, Obama hinted at the outlines of his plan to go after college savings in tax-advantaged accounts known as 529s.

When a government is desperate for cash, it goes after the middle class, because that's where the money is….

Though millions of Americans have been putting money into "tax free" 529 plans to save for their children's increasingly expensive college educations, President Obama would change the law so that withdrawals from the plans to fund college would be taxed as ordinary income. So while you used to be able to get a nice tax benefit by saving for college, now you'll be shelling out to Uncle Sam every time you withdraw to pay for Junior's dorm fees.

This doesn't hurt the very rich — who just pay for college out of pocket — or the poor, who get financial aid, but it's pretty rough on the middle– and upper–middle class. In a double-whammy, those withdrawals will show up as income on parents' income tax forms, which are used to calculate financial aid, making them look richer, and hencereducing grants.

Likewise, Obama proposes to tax the appreciation on inherited homes.

Reynolds notes that a GOP Congress won't let Obama's plan to tax 529s (or much of anything else) happen on their watch. That's good, but the GOP has its own problems, which inlcudes wanting to cut taxes without addressing spending (they did exactly this during the first six years under George W. Bush, where they jacked spending while goosing spending up the yinyang).

Related (and cited by Reynolds): Bloomberg's Megan McArdle worries that Roth IRAs are the next savings vehicle Obama will go after.

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  1. Yeah! Well, abortion is murder and should totally be illegal because sentient beings brought the fetus into the world, and it’s dependent on them, but it becomes a sentient being, so it’S MURDER for parents to abort!

    1. I fully support post-birth abortions.

      1. You probably already know that I do.

    2. Shit, shoulda put on my [perfectly legal] body armor for these comments…

      1. NO FAIR!! ONLY THE COPS SHOULD HAVE THAT!!! WIDESPREAD USE MAKES MY GUN LESS EFFECTIVE!!!

        *frothing at mouth, chewing on furniture*

        /John derp

  2. NUH UH! Abortion is a woman’s right to choose! The fetus is totally dependent on her till very late in the term, and even after it’s born. Therefore, it’s not “viable” without the mother, so it isn’t a being with moral sense or the capability of directed thought! So, abortion should be safe, legal and rare just like it is TODAY!

    1. “viable”… I do not think that word means what you think it means.

      Also, anybody want a peanut?

  3. Remember this weekend? Good times!

    *runs away after dropping hermaphrodite half-thin-crust/half-deep-dish pizza garnished with circumcised foreskins and artisanal mayonnaise*

    1. Just wait for ENB’s next post. Don’t try to derail a perfectly good “Thanks Obama” post.

  4. DO we care about the middle class more than other classes?

    Isn’t even focusing on the middle class a mistake in such analysis?

    1. No, but the people in favor of these sorts of taxes claim to, so it’s nice to throw this in their face and force them to admit that the only thing they care about is government for the sake of government. It might even convert a few honest ones.

      1. I’m a firm believer that people aren’t convertible by facts and evidence. They either come to it on their own or they don’t.

        1. I think coming to it on your own involves exposure to facts and evidence.

          1. meh… I’m not convinced. I think it takes form from epiphany that makes you want to seek out resources- not from seeing resources that open your eyes.

            I have no proof of this, just a hunch based on anecdote.

            1. Time is the critical factor. Facts, evidence, and most important of all logic can convert someone, but it won’t happen in one conversation. People take time to switch their beliefs (a lot of times in the order of years). I’ve convinced people that our current childcare scheme is wrong, but it has taken over a year of conversations to do so. My logic didn’t change but their comfortableness with it did.

              This is also the reason why you can see someone switching ideologies nearly a year before they actually announce that they have done so.

              1. Think of the opportunity costs!

    2. If they’re the ones being shafted, why shouldn’t the focus be on them?

  5. Sorry for being a dick first thing out the gate on a Monday. You know how I am.

    1. such things are unavoidable when e’er you eat mayo and foreskin.

      1. You are wise, indeed, o’ Spencer. Wise indeed….

    2. It’s OK. You’re just being you. But I don’t see what this has to to with Monday.

  6. But remember: Obama wants to cut taxes on the middle class by taking some gold coins from Scrooge McDuck’s swimming pool.

    1. so, he’s a beagle boy?

    2. Someone needs to explain to the progressives that Scrooge McDuck is a cartoon character and is not intended to be a realistic portrayal of the investment techniques of the very rich.

      So much of hard-left economics is based on the idea that rich people simply stash their money in a swimming pool in the form of gold coins. Thus, advocacy for things like a higher minimum wage. “It will boost the economy, by making those billionaire owners of McDonald’s franchises take some of the money out of their swimming pools and give it to people who will spend it!”

      Ask them what “capital” is, what role it plays in productivity, or how it is created, and they start making fun of “trickle down” economics. The idea that rich people became and continue to be rich by investing their money would never occur to them.

      1. blathering blatherskite!

        1. Thats GizomDuck you philistine.

          1. yes, who’d secret identity was a bean counter for scrooge… before Gyro’s scrooge funded supersuit happened to use the same code phrase to activate…

            BTW, Darkwing was a WAY BETTER superhero.

            1. I agree. Darkwing was awesome.

      2. Scrooge McDuck is kind of a libertarian though. I always liked him. I also found the lesson of the Number One Dime very valuable.

      3. What? Who doesn’t enjoy a money bath on occasion? “Your labor? I’m soaking in it.”

      4. “rich people simply stash their money in a swimming pool”

        Like who believe this crap a bout swimming pools? The company I partially own, stores all its net cash flow in a vault in the factory loft. Whenever we pay out a dividend, we instruct the recipients to stash the cash in coffee cans and bury them in the back yard. God forbid they spend it on braces for their kids teeth, or an nice restaurant dinner, or even music lessons or a math tutor. If we catch them spending even one dime, they are forced, under the shareholder agreement, to rip up their stock certificates.

      5. What if they did buy gold coins? They had to buy them from someone. Since the coins are durable, I don’t see how it makes a difference to the economy except insofar as affecting the price of those particular goods.

        If OTOH the idea were that the rich were buying yachts & sinking them to conduct burials at sea, then you’d have an argument that they’re a drag on the economy, shifting prod’n into unproductive goods.

  7. Taxing the middle class.

    “That’s where the money is.”

    1. Really, it’s quite simple. Criminals steal from the people who have money. What’s the point of stealing from people who you’re already paying to support your criminal enterprise?

    2. “That’s where the money is.”
      In his autobiography, Willie says he never said that.

  8. Thanks Obama! I’m in the middle of dual financial colonoscopies of income tax and college financial aid applications. Stupid me for earning a decent income and saving for my kids’ educations. Getting tired of being the rube in every government joke.

    1. Working for a decent income is a fool’s game, Drake.

    2. OMG, this SO much. Last kid is now a sophomore in college, so we’re almost DONE finally.

      What a shit process. Oh, and because I make so much, we don’t get shit anyway! Still have to FAFSA down, though, cause them’s the rules.

      I told my kids to get better grades cause then you go to school for free like I did, but did they listen to me? NOOOOOOOOO…..

      1. did they tell you to make less money so they could go to school for free like you did?

        1. Yeah, that would be the smarter move, since better schools don’t give merit scholarships anymore.

          1. Don’t know what schools you’re referring to. Private schools certainly have all kinds of merit scholarships in my experience.

            1. I didn’t know socioeconomic status was considered merit…

              1. Go to a school trying to build a engineering program some time. My school handed out ten thousand for just showing up. Of course we were being subsidized by the guys in the soft majors.

              2. I didn’t know socioeconomic status was considered merit…

                Boom

            2. I only applied to a single private school that still had merit scholarships, over a decade ago. And I only applied there because I had to apply to *somewhere* that did, since I was a National Merit Scholar.

              1. National Merit Scholars are ass-kissing grinds. The cool people are National Merit Semi-finalists (paid for 4 of my 6 undergraduate years at State U)

                1. (paid for 4 of my 6 undergraduate years at State U)

                  For me? High School. Best seven years of my life.

            3. My college was paid for by my parents /silverspoon

        2. We’re enduring that from our oldest. He envies the poor kids who get totally free rides.

          Our culture is fucked up on Biblical levels. It’s like we’re a living example to to future generations of how to fuck up a mostly good thing.

          1. Thank god my kids are budding masters of the universe with full academic rides (so far).

            1. Of course, the lawyer-to-be will still graduate with $20,000 in debt because of living expenses, blackjack losses and assorted whatnot.

              1. what?! does a decent education NOT include courses on counting cards and not playing against house money?!

    3. We flat out told our kids, if you want to go to college you have to pay for it yourselves.

  9. That’s good, but the GOP has its own problems, which inlcudes wanting to cut taxes without addressing spending…

    Arguably better than raising taxes without addressing spending?

    I kind of wish Obama’s plan would pass muster with Congress. The education bubble is badly in need of that bursting.

    1. is it? is increasing debt by 5 better than increasing debt by 2?

  10. When a government is desperate for cash, it goes after the middle class, because that’s where the money is….

    You don’t seriously expect me to read the whole thing before commenting, do you?

  11. Related (and cited by Reynolds): Bloomberg’s Megan McArdle worries that Roth IRAs are the next savings vehicle Obama will go after.

    McArdle isn’t wrong, except about one thing. Why is she encouraging people to save, when the incentives are obviously set up for you not to. Don’t be a fool. Be a welfare queen instead.

    1. I am debating if I should stop going with the Roth option, in fear of this happening.

      1. Meh, ?I think the best course of action is to stay the course until actual politicians start talking about doing it. Of course by than it will probably already be attached as a rider on some unrelated bill.

        1. By then it would also be too late to do me any good, too.

      2. This one gets me. The money is already taxed. It is post tax. So even theoretically only the cap gains could be taxed without running afoul of double taxation. WTF. I don’t think they would do this as it would be quite a straw for the camels back to bear.

        1. Government can double tax all they want. All you can do is whine and complain about it, but they’ll still get away with it.

          1. Government can even do worse than that. They can tax your savings (already taxed) and confiscate say… 10% of all savings and investment accounts. Greece, we’re looking to you for inspiration!

            That way if you are responsible and save for the future you get more of your stuff confiscated. But if you are irresponsible and blow through every dime you have, not only do you get to spend all that money, you also get to spend a bit of Mr. Sensible Saver’s money as the wealth is redistributed.

            Nope… not a perverse incentive to be found.

      3. I’ve got a 7 year old and 2 4 year olds. I’m forcing the twins to play mixed doubles tennis as I see it is the least crowded option for scholarships. the 7 year old is screwed unless he gets merit.

        Seriously, I’m banking on cash and low yield investments to keep pace with inflation of college costs… which means I really hoping that in the next 10-12 years the higher learning bubble will burst…

        1. is that 24 one year olds? Wow spence…CONDOM! AND LESS HOOKERS AND BLOW!

          1. ha! no, twins who are 4 years old- lol. a 24 year old will NOT be living in my house unless it’s my second wife/mistress. lol

        2. Good luck, brother 🙂

        3. If the bubble does burst, that might mean so few people go to college that you don’t need it to compete any more.

        4. I hear golf is big-time for this. Apparently a large number of golf scholarships go unclaimed every year.

          It is a particularly good time to be a woman seeking an athletic scholarship, what with Title IX. Gymnastics, golf, tennis, volleyball… all good sports with opportunities for athletes of less than amazing abilities.

          Actually, this as been true for a very long time. Back in the 80’s my ex was able to land a spot on the women’s tennis team at a lower tier division 1 school with no competitive tennis experience at all. She was taught by me… also with no experience in competitive tennis. Now, she was a pretty great all-around athlete. But still… walking on to a Division 1 team with only a year or two of experience playing a sport, and having never competed at any level? Women athletes were in short supply!

    2. Fuck off, NIKKI!! I POSTED THAT ON THE MOURNING LYNX!!!

      PAY ATTENTION!!!

      1. Yes, I saw it there, but at that point this had its own post. Should none of the comments in this thread be here?

        1. None. I am setting up camps for them as we speak. And putting on my armband. I am certain I will at least have the support of Tony…

          1. Heh. Remember when Nikki was dividing up the commentrait into camps of basically ‘do-ables’ and ‘uglies’?

            1. Actually I think there was some calling dibs in there with somebody else, too…

              1. I wonder if I was categorized. And can we get a photo of Nikki?!?

                1. Maybe you were one of Jesse’s.

  12. Tony will probably be along soon to explain that all wealth belongs to The Glorious Collective. Anyway, saving money is so bourgeois.

    1. We all know that saving money is equivalent to burying it in a coffee can in the backyard. And since not giving is taking, saving is really theft.

      /sophisticated Keynesian analysis

    2. It’s the flip side of the “We owe the debt to ourselves” pseudo-argument.
      We owe the debt to ourselves so we’ll pay it out of our money. Anybody who is saving is stealing money from the ‘our money’ pot and so should have it forcibly extracted so we can pay ourselves the debt we owe ourselves with our money.

    3. Any money the government lets you keep is no different than the government giving you welfare. This is way tax cuts are no different than spending increases.

      1. The Washington Post actually referred to the 529 tax break as a subsidy. No, really. Taking less is giving.

  13. No, fuck you, cut spending.

  14. Sorry for being a dick first thing out the gate on a Monday.

    “Never apologize, never explain.”

    1. that’s the key to a good marriage.

    2. “Hank the Deuce” – Henry Ford II said “never complain, never explain”. Similar idea!

      1. well the actor playing the ghost of bruce lee said “no retreat, no surrender.”

        1. Jimmy V said “Never give up, never surrender!” Or was that Tim Allen in Galaxy Quest?

  15. Some article I saw (NYT, probably) claimed taxing 529s was no big deal, because the people who really benefit from them make 150k or more.

    Apparently, if you make 150k (gross) and have a(!) kid in a good school, you can EASILY afford to spend 25% or more of your gross income on tuition and fees.

    1. I have several 529s for the grandkids. Seems to me that the money I put in was already subject to income tax. So why would it be taxed when withdrawn? Is OGL talking about taxing only the gains or the whole withdrawal or blowing unicorns out his backside as usual?

    2. The Late P Brooks|1.26.15 @ 10:16AM|#
      “Some article I saw (NYT, probably) claimed taxing 529s was no big deal, because the people who really benefit from them make 150k or more.”

      Taxing other people is never a big deal.

      1. +1 fellow behind the tree

  16. The idea that rich people became and continue to be rich by investing their money would never occur to them.

    Even worse, the idea that those rich people got rich explicitly by NOT spending every fucking nickel they could get their hands on conflicts with everything they believe about macroeconomics and the Holy Gospel of the GDP Growths.

  17. What it also argues for is saving even more than you are. The government is going to come for its money one way or another, and the best way to deal with that is to have more than you need.

    And people wonder why I think Megan McCardle is a fucking moron.

    1. as opposed to not having any left for them to take?

      I’d go for that before making sure I could make my protection payment and still afford what I wanted.

    2. I don’t. She is a complete moron. It is the one thing you and I can agree on, which means it is almost certainly and obviously true.

  18. (they did exactly this during the first six years under George W. Bush, where they jacked spending while goosing spending up the yinyang)

    um, wut?

    1. see, when one adult loves another adult, sometimes they “goose” each other “up the yingyang.”

      This is, however, illegal in 15 states.

  19. Leftists have always and will always go after the middle class. First, that is where the money is. Rich people are able to avoid taxes in ways the middle class can’t. This is especially true right now. The US has the most progressive tax system in the world. There isn’t much more money to be had from the rich. Taxes are so high and the top earners pay such a large percentage of the total taxes paid, the feds are well on the other side of the Laffer Curve when it comes to the rich. That leaves the middle class if they want any more money, and they always want more money.

    Second, leftists hate the middle class because they are gross and lower class without the virtues of being dependent and controllable by the government. In the middle class, leftists just see a bunch of low class gross people they don’t like sitting on a bunch of money that leftists could be using. So all leftist policies will punish the middle class as much as politically possible.

    1. They like the ideaa of the “middle class”, but they skip over the part where the middle class got to where they are by working at their careers and acquiring skills and buying property, and that these traits are what make a thriving middle class essential to a stable country.

      The left would prefer a middle class that is artificially created by government hiring, union extortion, and income tranfers. That way, you have people who know that their status is completely dependent on the government’s continued generosity and can be relied upon to vote accordingly.

      Just look at how oftern Progressive rhetoric explicity claims that the middle class never existed before Unions created it out of nothing, and that the always-struggling middle class would vanish completely without new government programs. Thet don’t want a stable, community-sustaining group of self-reliant people, they want a group with the same amount of disposable income, but one that is 100% dependent on the state if that income is to continue.

      1. They want to destroy anything that doesn’t further their politics or help them get more power.

        1. What totally escapes them is the fact that the attributes that make a middle-class desirable – the skills to create new wealth more productively than by flipping a burger, the investment in those skills that makes them tend to want to preserve the status quo and to reinvest in their communities – are not replicable by just choosing a few million poors at random and handing them money. Sure, you get a supplicant group who rely on your party staying in power. But you don’t get wealth creation, you don’t get people who want to make their communities better, and you don’t get people who can be relied on to invest in job skills ALL BY THEMSELVES without even a single government training program to encourage them, and you don’t get people who are net contributors to the GDP.

  20. There is something like a trillion or more dollars sitting in 401Ks right now. Don’t you know the people in Congress on both sides of the isle slobber all over themselves when they think all that money sitting there waiting to be stole. To a Congress creature your 401K is probably the sexiest thing he has ever seen in his entire life. Good luck keeping their greedy paws off of it.

    1. I’m just trying to figure out which one (regular vs Roth) will result in them stealing less.

      1. Neither. You can be taxed a lot now, or even more later.

    2. Yeah, that’s a matter of concern to me since I’m getting old enough to think about retiring but I’m still too young to actually do it. I figure right around the time I do decide to retire some fucking “progressive” is going to rape my 401K “becuz it’s soooo unfair that you have retirement savings you selfish SOB!”

      1. Look sandwich, it is unfair and unjust that you get to retire to a nice life while some guy who spent his entire life smoking crack and in and out of jail has nothing. How dare you hoard all of that cash when it could be used to do good things.

        1. It doesn’t even take that. There are millions in this country who worked their whole lives and earned a good living – but spent every nickle they ever made and more. They have nice cars, nice houses, nice toys, kids in college and loads and loads of debt.

          They are the ones who will come clawing after your retirement savings. So the government can take it all and spread it around “fairly”.

    3. The money can be taken away via Quantitative Easing, aka printing more fiat money.

      401(k)’s were always a sucker’s bet because the whole idea of deferred taxation means that you will be taxed later at a higher rate than the current rate.

  21. President Obama would change the law so that withdrawals from the plans to fund college would be taxed as ordinary income.

    Only the “rich” save for the future, anyway. Let’s plunder them!

  22. At one time, I looked into converting to a Roth. I was so horrified by the tax hit I would take on the rollover, I completely stopped thinking about it.

    1. You are just paying taxes now and trusting them that they won’t want more later. Good luck with that.

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