I did not watch the State
of the Union address last night. Instead
I watched the wonderful film GAMBIT with Michael Caine and Shirley MacLaine on
TCM. This morning I “wandered” the web
for blogs and articles on the address.
As you might expect, I was
interested in BO’s statements on 1040 issues.
In addressing tax reform BO
said -
“Both Democrats and Republicans have argued that our tax code is riddled
with wasteful, complicated loopholes that punish businesses investing here and
reward companies that keep profits abroad.
Let’s flip that equation. Let’s work
together to close those loopholes, end those incentives to ship jobs overseas,
and lower tax rates for businesses that create jobs right here at home.”
This is about business tax
reform. The only reference to 1040 tax
issues in the address was a call to expand the Earned Income Tax Credit –
“So let’s work together to
strengthen the credit. . .”
He referenced Senator Mark
Rubio’s concerns with the EITC. Rubio
wants to take the EITC out of the Tax Code and replace it with perhaps a direct
wage subsidy. The President clearly
wants to keep the credit as part of the 1040 – where it clearly does not
belong.
Rubio had pointed up two of
the biggest problems with the EITC –
“One weakness of the EITC compared to the minimum wage, however, is the
fact that low-wage workers only see the refundable tax credit once a year in a
lump sum, rather than a small increase in their paycheck over a full year.”
And –
“Currently the Earned Income Tax Credit has one of the highest payment
error rates of all federal programs that cost between $11.6 and $13.6 billion
in 2012. Whether these payment errors are due to intentional fraud and abuse or
the program’s staggering complexity is up for debate (it is likely a mixture of
the two).”
Apparently the President is
not concerned with these serious issues.
It is clear that President
Obama does not want serious, substantive tax reform. He wants to continue to complicate the
already mucking fess that is the US Tax Code by expanding refundable credits –
which are magnets for tax fraud. Do not
look for any real tax reform in 2014, or probably anytime soon.
The other item of interest
in the address was his call for a “myRA” payroll withholding starter retirement
account for employees without access to a 401(k) plan.
It appears the “myRA” would
be a kind of US Savings Bond. Many employees
already have the option of purchasing US Savings Bonds via payroll
deduction.
There were no specific
details on the “myRA”. BO spoke of a bond
that “guarantees a decent return” –
but what is a “decent return”. Current
savings bonds certainly do pay more interest than basic savings accounts – but do not provide what I
would call a “decent return”. Would
employers, with or without 401(k) plans, be required to offer this savings
opportunity to all employees? Would
employee contributions be tax deductible?
Would there be a ROTH-like option?
I have read that this
account would possibly have a maximum lifetime contribution limitation. When the maximum is reached the account could
be rolled-over into an IRA account.
I support anything that
encourages and assists Americans to save for retirement, but would obviously need
to see more details before giving the “myIRA” a thumbs up.
TTFN
