Amazing Waste: Tax Subsidies to Qualified Retirement Plans

Source: Calvin H. Johnson, Tax Notes, Vol. 144, No. 727, 2014

From the abstract:
The proposal would repeal the tax advantages given to qualified retirement plans. Qualified plans are ineffective or counterproductive for their given rationales, which makes them a rich source of revenue when the United States needs money. Johnson argues that qualified plans provide a safety net where there is little need for it and provide no safety net where it is needed. Qualified plans are said to improve the value of a dollar by moving it from high-income working years to low-income retirement years. However, the tax advantages are distributed under a reverse-Robin Hood pattern to high income groups (many with soaring salaries) and by negating the tax brackets. That distribution of benefits can be expected to reduce the utility of a dollar. Qualified plans are said to be an incentive for savings, but when government cost and deficits are considered, the plans reduce net national savings. It would be cost free and effective to increase retirement savings by mandating savings for retirement by imposing default rules without a tax subsidy.

The proposal is offered as a part of the Shelf Project, a collaboration of tax professionals developing methods of raising revenue in ways that improve the fairness and efficiency of the tax base. Revenue raising is not on the political agenda, but inevitably it will be. The Shelf Project has 74 proposals so far.