Congress courageously sticks US taxpayers with a $6 trillion liability

Guest Post by Simon Black

There seems to be an unwritten rule with lawmakers that, every time they create a terrible piece of legislation, they give it the most noble-sounding name.

The USA PATRIOT Act from 2001 was a great example. It sounds great. Who wouldn’t love a law named for Patriots?

And yet that was easily among the most freedom-killing laws ever passed in US history, giving the federal government nearly unlimited authority to wage war and spy on its own people.

There are so many other examples– the USA FREEDOM Act from 2015 (which renewed many of the worst provisions of the PATRIOT Act).

Or the HIRE Act from 2010, which created some of the most heinous tax rules of the last fifty years.

The names of these laws all sounded wonderful. But their effects were absolutely terrible.

The new SECURE Act will likely be no different.

If you haven’t heard of SECURE, it’s a new piece of legislation aimed at ‘fixing’ the US retirement system.

SECURE stands for “Setting Every Community Up for Retirement Enhancement”, which is pretty clever when you think about it.

People want to associate their retirement with a word like ‘secure’. So even without knowing anything about the law, most people will probably have good feelings about it based solely on the name.

But if you actually read the legislation, SECURE contains a number of predictably terrible consequences.

For starters, SECURE is a basically a gigantic tax increase. And it’s a tax increase that will particularly affect your children when you pass away.

Under current law, you could leave your IRA to your children in a fairly tax efficient way. That’s actually one of the nice things about an IRA.

If your kids inherit your IRA, they’re required to pay out a small portion of the funds each year… and those distributions would be taxable income.

But the current rules only require tiny distributions; your kids are allowed to stretch out the annual payouts over the course of their lives, resulting in very minor taxation.

The new rules completely eliminate this benefit.

Under the SECURE Act, your kids would have ten years to pay out (and be taxed on) the entire value of your retirement account.

This means that the annual payouts would be MUCH larger… thus bumping your children up to a higher tax bracket… meaning that they’ll end up paying much higher taxes on your retirement savings.

This is tantamount to a huge estate tax increase. And it’s one that primarily affects the middle class.

For wealthy people, retirement accounts typically only comprise a small percentage of their assets. So this rule change won’t have much of an impact.

But for the middle class, retirement accounts are often one of the largest sources of their estates. And this legislation will be a significant hit for them.

The US House of Representatives already passed the SECURE Act. And just in case you’re about to start hating on your least favorite political party, you should know that it was passed with almost unanimous support from both parties.

(though I have my doubts whether most members of Congress even read the legislation…)

It’s currently in the Senate and seems likely to pass, so this is a reality to prepare for.

In related news, Congress also made some movement on the Rehabilitation for Multiemployer Pensions Act.

Sadly this one doesn’t have a catchy acronym. But in essence the legislation is their comical attempt to address the multi-trillion dollar problem of unfunded pension plans in the Land of the Free.

We’ve talked about this before a number of times– the vast majority of state, local, and even corporate pension plans in the United States (and worldwide for that matter) simply don’t have enough money to keep their promises.

Moody’s Investor Service estimated last year that the total pension funding gap in the US is $4.4 trillion. A few months ago the American Legislative Exchange Council estimated it at nearly $6 trillion.

Bottom line, it’s a big number.

Pension plans in the United States are currently guaranteed by a quasi-government agency called the Pension Benefit Guarantee Corporation.

The PBGC is sort of like an FDIC for pension funds… so that if a pension plan goes bust, the PBGC will step in with a bailout.

Problem is, the PBGC itself is nearly insolvent and will run out of money in 2025. And its balance sheet is trivial compared to the multi-trillion dollar pension problem.

So Congress came up with a solution: go into DEBT!

According to the new legislation, whenever a pension plan runs out of funds, Congress wants them to borrow money in order to keep making payments to beneficiaries.

This raises an obvious question: who would be insane enough to loan money to an insolvent pension fund?

Well, you’ll be pleased to know that your esteemed members of Congress have courageously signed you up for the task, putting the American taxpayer on the hook for this potential $6 trillion liability.

Clearly this plan is the work of genius.

If nothing else, these two laws point to an obvious conclusion: it’s more important than ever to get your house in order when it comes to retirement planning.

Pension funds aren’t going to be able to keep their promises. Even Social Security, according to its own annual report, will run out of money in 15 years.

And even when you responsibly set aside your own money for retirement, lawmakers will suddenly change the rules and impose a major tax increase on the middle class.

Just imagine the things they’ll do if the Bolsheviks come to power next year…

If you’re a premium member, we’ll send you a report after the SECURE legislation passes to let you know how to reduce its impact.

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Horseless Headsman
Horseless Headsman

I’ve been self-employed all my adult life, so an IRA seemed like a good idea. At first. When I was young. It wasn’t long before I cottoned on to the nature of gov’t oversight and decided that it wasn’t a good idea to have a lot of assets so easily available to governmental ‘reorganization’. Government programs so often produce the exact effect that they are purportedly designed prevent that eventually you have to wonder if our fearless leaders are actually that stupid. It seems that is more likely than that they are nefarious masterminds disassembling our republic over the course of generations. I’ve met a few of them, and they aren’t the sharpest minds around.

Mygirl...maybe

I’ve been self-employed for so long I have no idea how to work for someone else. I don’t know what a tax refund is, never had one nor have I ever involved myself with IRA, SEPS and other forms of ‘savings and investing’. I can make my own investments, Uncle Sammy scares the crap out of me and I stay away from stuff that can be grabbed at the drop of a hat. Remember Obama’s MYRA? Remember Cyprus?

outwithlibs
outwithlibs

“Even Social Security, according to its own annual report, will run out of money in 15 years”.
Why doesn’t anyone ever talk about Welfare, Food Stamps, or medicaid running out of money?? Oohhhh….that would effect the masses on the government tit.

I retired in March, my husband (SmallerGovNow) in 2016. We withdrew ALL of our TSP’s (government 401K) upon retirement in lump sums. Sure, we took a BIG hit, but we know better than to “trust” the gubment any longer than we have to, to keep our monies secure until we decided to use it. We have put it into tangible assets, not a balance on a sheet of paper we get monthly….. So for our kid, he will actually have something when we pass ~ a paid home, 2 acres of land, fresh water outlet from a river, multiple fruit/citrus trees. Hopefully he can maintain it if he needs it for survival.

grace country pastor

Very cool to see a husband/wife team here on TBP… Yours is a house not divided.

grace and peace to you both…

Anonymous
Anonymous

Those who have found and cultivated their true soulmate in the midst of this mess are fortunate indeed.

grace country pastor

Rare and precious…

Y’all make it a good one today!

llpoh
llpoh

I can hardly wait for the first husband and wife TBP shitstorm! It will be a dopplers paradise. Seriously, this will be great.

doppler 1 (Smallergovnow): “that dumb outwithlibs has no idea what she is talking about. She should stay barefoot and in the kitchen.”

Then just stand back with the popcorn at the ready.

It will be epic.

BL
BL

🙂
Typical Llpoh shit stirring, don’t pay him any attention @outwithlibs.

Street Shitter
Street Shitter

He’s issuing a warning, it’s only fair play to warn people in advance. The government does it too.

Street Shitter
Street Shitter
CCRider
CCRider

Notice both ‘sides’ pushed it through. When it comes to expanding their take of the loot and power over the rabble there is universal agreement. Always. Now let’s see if the trumpster signs it into law. I’m laying odds he will. Any takers?

Vote, my ass.

Anonymous
Anonymous

Precisely why I don’t go all in, with max contributions into an IRA, a SEP.
The rules will change.
A ROTH seems smart, paying the tax on the front end, but when they get desperate, betcha they target those, too.
Being a metals believer, I fear they’ll end up going for those assets as well.
So, a gold IRA does not instill any type of confidence, either.
Paper trails…minimal.
Off book assets…alluring.
If they ban cash, then start hunkering down.

Hannity offered e-sign up yesterday for a chance to win one of 21 Glocks.
What a stupid idea, to get your name put on a list.
Want a Glock? Go buy one.

Finally, I believe Loop has made a good decision.
The US will bleed it’s residents dry and into poverty, by any and all means necessary.

Horseless Headsman
Horseless Headsman

There’s a difference between ‘going for’ and ‘getting’. Part of the difference involves kinetics.

TN Patriot
TN Patriot

Bleeding residents dry is the function of all socialist governments. Only THEY know how to properly spend the money you make.

Anonymous
Anonymous

It’s a bipartisan effort perpetrated by the largest criminal enterprise in history , the United States Congress !
We have a 2 party system the evil party and the stupid party . Obviously anything both sides of this same coin agree upon will be evil & stupid !
I think back to the days of Ted Kennedy , if he thought it was good for the country then I knew it was bad and if he wanted something controlled or banned I needed a life time supply !

piearesquared
piearesquared

Exactly. My rule of thumb is that at least one of the two major parties is wrong on any given issue, so if they agree on the issue then they are both wrong. Many politicians blather about “bipartisan agreements” or “bipartisan efforts”, etc. But when I hear “bipartisan” anything, I know it will probably be bad.

TN Patriot
TN Patriot

The more innocuous sounding the bill, the worse it is for the American taxpayer. The Affordable Care Act was only affordable for those who do not pay income taxes; for taxpayers it has been a disaster.

For many years, the government has had its eyes on the massive amount of money in IRA’s, 401k’s and other retirement accounts. Their solution is to take your money and give you an annuity. This will allow them to spread the wealth to those who did not plan for retirement. It sounds like the SECURE Act may be a step toward that goal.

The government is like the camel who puts his nose in the tent.

Frank
Frank

There have already been a few trial balloons sent up about the govt ‘protecting’ people’s retirement accounts.
As for a nice sounding name, maybe they could go with Fluffy Bunnies next time – everyone likes fluffy bunnies!

Iconoclast421

That kind of law is particularly heinous because it will encourage laziness. Why work if you have to pay insane tax rates on your income which stacks with the IRA payouts? Why not just collect the IRA payouts for 10 years, pay very little tax on it, and live like a lazy slob until its gone? By the time it is gone, you’re fully acclimated to living like a lazy ass slob and won’t ever have a solid work ethic. Why would any parent even want to do this to their child??? It disgusts me. A horrible disgusting money grab to capture the most funding from the passing of the boomers. What a goddam stupid generation.

TJF
TJF

With just a slight change of word order, it can be seen that this new SECURE bill is designed to set up every community.

piearesquared
piearesquared

“though I have my doubts whether most members of Congress even read the legislation…”

Talk about stating the obvious. Congress routinely votes on 500 pages, 1000 pages, 2000 pages, 3000 pages or longer bills. They never read the entire bill, and usually don’t even read any portion of it. They rely on their staff, lobbyists, and special interest groups to tell them generally what is in the bill. They rely on party leaders, donors, lobbyists and their handlers to tell them how to vote. Not only that, but there are often several different versions of each bill in circulation at any given time in various states of revision. They often don’t even know exactly which version of the bill they are voting on. When Nancy Pelosi infamously said “We have to pass the bill so that you can find out what is in it” she was exactly right. She just let the truth slip out. But even that isn’t always enough to “find out what is in it”, because sometimes the bills get revised AFTER they are voted on.

In a sane world there would be a (fairly small) limit to the size that any one bill could be. Longer bills would have to be split into two or more smaller bills. And the members of congress would be required to sit through a reading of the bill, and if they didn’t attend the reading then they wouldn’t be allowed to vote on the bill. But there isn’t much sanity in Washington D.C.

BL
BL

Extra tax fleece for your kids after you die. Pirates do what pirates do, just say no to potential butt reaming.

STOP SIGNING UP!

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