Tag: Politics Page 2 of 31

I nearly choked on my cereal when I read in the Boston Globe this morning that John McCain had accused Barack Obama [Note: McCain may not have been specifically referring to Obama; see update below] of proposing to tax individual retirement accounts. Scott Helman and Sasha Issenberg write:

“Watch out, they’re even talking about taxing your 401(k) contributions,” McCain said at Pittsburgh International Airport. “I’m going to protect people’s retirement, not tax it. I’m going to protect Social Security. I’m going to protect Medicare.”

I’ve done some quick research, and, as best as I can tell, McCain’s charge is not true. The slightly longer version is that he’s building assumptions upon assumptions, based in part on a mistake, and accepting the rhetoric of an anti-tax think tank as to what theoretical effect Obama’s tax proposals might have on 401(k)s.

According to the nonpartisan watchdog site FactCheck.org, McCain has been making this accusation off and on since last spring. I have to confess that I hadn’t been aware of it until now. FactCheck says McCain is staking his claim on a “giant blunder,” latching on to Obama’s proposal to raise the capital-gains tax. But 401(k) accounts allow you to invest your money tax-free, and are taxed as ordinary income when you reach retirement age and begin to withdraw money. The capital-gains tax has nothing to do with 401(k)s.

Some on the right argue that raising taxes the capital-gains tax and corporate income taxes will hurt 401(k)s because low taxes are always good for business and high taxes are always bad. That’s the case made by Deroy Murdock at Human Events, who points to a calculator on the Web site of Americans for Tax Reform that shows the value of your 401(k) rising under McCain and shrinking under Obama. I haven’t tried it, but it is transparently based on the assumption that the economy will do better with McCain as president than Obama.

Americans for Tax Reform, by the way, is a vehicle for anti-tax radical Grover Norquist, famous for once having said, “My goal is to cut government in half in 25 years, to get it down to the size where we can drown it in the bathtub.”

Bottom line: McCain’s accusation is false through and through misleading. We’re all familiar with the trickle-down arguments on which it is based. But if you’re McCain, it sounds so much better to say that Obama wants to tax the 401(k)s of “policemen, firefighters, nurses,” as he did last April, than it does to say ordinary people might suffer some theoretical harm if Obama raises taxes on ExxonMobil.

Update: Mike from Norwell reports that there are some congressional Democrats who are proposing a tax on 401(k) accounts. Not Obama’s proposal, and, needless to say, he would be insane to go along with it. He is not insane. But I’ve toned down the headline.

Every time I go to the Real Clear Politics composite poll average, the gap widens. It’s now Obama 51.2 percent, McCain 44.2 percent.