Asking For More Than 401(k)s
The NY Times ran an editorial on Friday lamenting how employees are borrowing more and more from their 401(k)s to pay for medical bills, mortgage payments, and stints of unemployment. The Times reports that this trend is exacerbated by the...more »
Posted on August 17, 2008 2:51 PM
Fuzzy Math, Part Deux
The New York Times ran an excellent story this week showing how the Obama campaign is promising that 2+1 can equal 4. Obama's plan for universal health care relies on two sources of funding: reversing some Bush tax cuts and...more »
Posted on July 27, 2008 10:05 PM
Family Values for 2008
The U.S. government needs to do more for American parents. (See Kristin Bateman's post on a new article by Eric Nguyen examining parents in bankruptcy.) But it's not just Europhile liberals who are saying this anymore. Although, in recent years,...more »
Posted on July 1, 2008 8:54 PM
SEIU's Grover Norquist Strategy
According to the NY Times, it appears that the Service Employees International Union is developing a strategy to hold Democrats accountable to pro-working-class policies once in office: "In a move likely to upset some Democrats, the delegates approved an "accountability...more »
Posted on June 7, 2008 9:13 AM
A Huge (and Unfair) Tax Bill on Top of Foreclosure
A story in this morning's New York Times shows another consequence of the foreclosure crisis: a huge tax bill for those losing their homes. When a home is foreclosed on borrowers whose mortgage exceeds their home value, the difference is...more »
Posted on May 30, 2008 6:42 AM
Eli Lilly Edits Disclosure Bill
Senators Grassley and Kohl have introduced legislation that would require disclosure of all gifts from pharmaceutical companies to doctors over $500. That sounds like good news, except, according to this report, Grassley's staff worked closely with Eli Lilly to re-write...more »
Posted on May 14, 2008 12:33 PM
Tier 4
The fastest growing segment of private health insurance is called "Tier 4." Under this system, co-payments for drugs vary with how expensive they are. Expensive drugs are classified "Tier 4" (some plans even have a "Tier 5"), and the co-payments...more »
Posted on April 25, 2008 2:07 PM
Credit Card University
The New York Times yesterday examined the challenges middle- and upper-middle-class families now face as they try to pay for college with less home equity. Only home-owners, of course, can benefit from home-equity loans, so what makes this story sad...more »
Posted on April 21, 2008 7:36 AM
A French Education
The BBC reports that at least 19,000 teachers and students have protested in Paris, along with more protesters in other cities, in response to a proposal to cut funding for schools and lay off teachers. The contrast with the...more »
Posted on April 12, 2008 4:06 PM
Bake Sales in Massachusetts
It's school budget time in Massachusetts (and elsewhere), which means it's time to lay off teachers, increase class sizes, and cut funding for everything from basic supplies (i.e., make teachers pay more out of their own paltry salaries) to "extras"...more »
Posted on April 10, 2008 2:02 PM
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oops--I meant 15 cents.
Posted at August 20, 2008 11:26 PM in response to Asking For More Than 401(k)s
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destor and RS--I think there's actually a lot of agreement here: The issue with the tax breaks is that there are too few breaks for people who aren't paying high marginal rates. If you're paying 35% (taxable income over $349,700 in 2007), you get 35 cents on the dollar from Uncle Sam up to the maximum ($15,500), which you can afford to contribute. If you're paying, say, 15%, you only get 10 cents, and it's unlikely you can contribute all that much.
Posted at August 20, 2008 11:26 PM in response to Asking For More Than 401(k)s
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Sorry for not responding for a couple of days. I have been out of town and offline.
401(k)s are a significant part of our pension system, and this welfare is funded through income tax deductions--why should progressives support a social welfare that is regressive?
The point of a retirement system is to provide security. Empirically, our system leaves very many people very insecure. The mandate gets everyone to save, and the government contributes $600 towards everyone's saving AND would subsidize up to $5000 of savings (the number in Ghilarducci's plan).
Yes, the tax benefits are partly in the form of deferred taxation, (1) that is itself a huge benefit; (2) you also are taxed lower on it (given our marginal system), all the more so if your income falls into a lower bracket.
Posted at August 20, 2008 11:05 PM in response to Asking For More Than 401(k)s
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Thanks for these comments. I largely agree with JohnW. I'd recommend the Sunstein and Thaler's new book, Nudge, which documents, with data from behavioral economics research, how poorly a job people do saving for retirement. (Nudge, though, opposes mandates for ideological reasons not dissimilar to those Lalo put forth.)
I'd also respond that, under Ghilarducci's plan, we could all still save for retirement in addition to GRAs--there would just be no tax benefit. The tax benefit is regressive (given our progressive tax structure and the greater ability of the wealthy to save).
Also, the 3% return is a floor, not a ceiling. As Ghilarducci notes, we should expect professionals to do a better job than individuals investing. I link to an article in yesterday's Times about people contemplating retirement now--it's not good, entirely b/c the market is currently down.
Posted at August 17, 2008 7:40 PM in response to Asking For More Than 401(k)s
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I should clarify my point. It's that cancellation should be treated as investment loss, since that what it is--the house lost value not because of use but because of decline in value. The "punishment" for investment loss is the loss, not a tax bill for tens of thousands of dollars. This also involves unsophisticated, middle-class borrowers trying to profit from what has turned out to be a bubble. My argument is only that the treatment is unfair and inconsistent. (Compare their treatment by the government to that of major investment banks.)
Thanks also for the corrections--I appreciate it. My apologies.Posted at May 30, 2008 8:56 AM in response to A Huge (and Unfair) Tax Bill on Top of Foreclosure
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Dr. Baker,
What do you make of Marcia Angell's arguments from "The Truth About the Drug Companies" (essay version here http://www.nybooks.com/articles/17244) that the R&D justification is a myth because 1- it's a small part of their budget and way lower than profits; 2- many of the companies are actually foreign; and 3- universities do a lot of the innovating on public money and then license the patents?
And my apologies for how I presented the Freakonomics thing--the article was on how to decrease driving (so they discuss tax measures along with PAYD) and they acknowledge that the idea for PAYD is at least 15 years old (and not their own).Posted at April 27, 2008 11:03 AM in response to Tier 4
