|Hillary Clinton proposes 401(k)s — with federal matching funds |
|WEBSTER CITY, Iowa (AP) — Democratic presidential candidate Hillary Rodham Clinton proposed tax cuts of up to $1,000 a year on Tuesday to encourage millions of working-age families to open personal 401(k) retirement accounts. |
The New York senator said the program would be paid for through higher estate taxes.
At the same time, Clinton said she has given up another idea for a savings incentive — giving every baby born in the United States a $5,000 account to pay for college or a first home.
Instead, she said, her plan for what she called “American Retirement Accounts” will provide “universal access to a generous 401(k) for all Americans.”
She outlined a program in which the government would provide a “matching refundable tax credit — dollar for dollar — for the first $1,000 of savings done by every married couple making up to $60,000 a year.”
Families with incomes of up to $100,000 would receive a smaller tax break to spur them to contribute to a personal 401(k).
“This means tens of millions of middle-class families will get matching tax cuts of up to $500 and $1,000 to help them build a nest egg for retirement,” said a fact sheet distributed by the campaign.
Higher income earners who don’t have employer-sponsored plans could participate, but they would not receive tax breaks and the contributions they make would count against the IRA contribution limit.
Clinton proposed freezing the estate tax at projected 2009 levels to pay for the tax cuts. Her campaign said that would mean estates of more than $7 million per couple would be subject to taxation.
At a cost of $20 billion-$25 billion a year, the plan is Clinton’s largest domestic proposal other than her plan for universal health insurance. The Republican National Committee criticized her level of spending.
“The level of recklessness in Senator Clinton’s spending proposals is only eclipsed by the cost of the programs and the destructive effect they will have on our economy and taxpaying families,” said RNC spokesman Danny Diaz.
Clinton first mentioned a so-called “baby bond” last month in an appearance before the Congressional Black Caucus, saying it was just an idea and not a policy proposal. The idea was criticized by Republicans, and she told The Wall Street Journal in an interview published Tuesday that it’s off the table.
The campaign of her Democratic rival John Edwards suggested it was an example of Clinton setting her positions by polls. “Apparently, new polling data seems to have pressured the Clinton campaign to throw out the baby bond with the bath water,” said Edwards spokesman Chris Kofinis.
Clinton’s campaign said that for every $7 million estate that gets taxed, at least 5,000 families would receive the matching funds.
The retirement account proposal would be designed for adults of working age and not open to children, but there is no requirement that people work to participate. The matching funds would come as a refundable tax credit that would be deposited into the 401(k) plan.
She said she would encourage employers to have direct deposit from paychecks into the accounts. Like other 401(k) plans, contributions would not be taxed but withdrawals would be.
Clinton said less than half the families in the United States have retirement savings accounts and those who have them aren’t saving enough. She said she often meets people working even into their early 80s because they don’t have enough savings.
“We don’t have much of a nest egg to fall back on,” she said.
Published in The Messenger on 10.10.07