Top Administration officials are considering taxing deposits into 401(k) savings plans up front. The short-term fiscal benefit to the tax collector would be significant. But the cost to the economy could be enormous.
Taxpayers have been taking advantage of 401(k)s to save for retirement since 1981. It was an unintended consequence of a law enacted three years earlier to allow taxpayers a break on taxes on deferred income, and its impact has been tremendous: As of March of this year, 401(k) plans held $5 trillion in assets on behalf of about 55 million active participants and millions of…

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