I received my quarterly retirement savings account statement yesterday, and the news is dismal. I’ve lost 44% of my savings in the past year, at least on paper. That wiped out not just the gains it had made in the last decade or so, but it’s a lot less than the hard cash I put into it. Yes, it’s no surprise, but it hits you you pretty hard when you’re holding it in your hands and thinking, boy, that just added another 5 years of work before I’m able to hit that tropical beach home retirement I’ve been fantasizing about. And that’s assuming I HAVE a job – with my company looking pretty rocky and my wife out of a job, it’s not a pleasant prospect.
I’m sure I’m not alone. Millions of Americans are probably looking at their statements this week and thinking the same thoughts. And it doesn’t bode well for the party in power that has brought us to this state –the Republicans who have been in the White House for the last 8 years and controlled Congress for 10 of the last 12. So McCain is fighting an uphill battle at the start. So what does he offer us? After weeks of dilly-dallying about the economy, seesawing from one extreme to the other ("The economy is sound. The economy is in crisis. I'm for a bailout. I am against a bailout. I am against regulation. I am for regulation"), McCain finally issued his long-awaited plan to help us through this economic crisis yesterday, let’s take a look at it:
- McCain proposed that people 59 and up who can withdraw money up to $50,000 from IRAs or 401(k) retirement plans in 2009 and 2010 pay a tax rate of 10 percent
- Reduced the capital gain tax to 7.5 percent from 15 percent in 2009 and 2010
- increased tax write-off for stock losses from $3000 to $15,000 in losses a year for 2 years
- a suspension on the tax on unemployment insurance benefits in 2008 and 2009
- a government guarantee on 100 percent of all savings accounts for six months.
OK, if you’re a wealthy near-retiree with huge investments who made a killing on the stock market and therefore have tons of capital gains (hmm.. a lot of McCain’s friends, perhaps?), boy, this is the perfect plan for you!! However, to the rest of us poor saps (oh, about 95% or so), this means nothing. Cutting the capital gains tax? What capital gains? How many middle income people would have any capital gains if they are forced to sell their stock holdings in the near future?The last 2 points might mean something – except for most Americans, their 39 weeks of unemployment have already run out or close to doing so, so no tax on it for the next 2 years means zilch. And the bailout plan already guarantees your bank accounts upto $250,000, which is enough to cover me – and probably most except McCain’s friends.
On the other hand, here’s Obama’s proposal, announced the day before McCain’s big rollout. Compare - Obama will:
-Suspend the tax on unemployment benefits
-Extend unemployment benefits
-Propose 90-day moratorium on home foreclosures at some banks
-Give $3,000 tax credit for each additional full-time job a business creates; the tax break would end after 2010
-Allow people to withdraw up to 15 percent of their retirement funds, to a maximum of $10,000, without any penalty this year and next
That makes a lot more sense to me. He also will suspend the unemployment tax, and will actually extend it for those unable to find a job in a year when a million jobs have already been lost. The moratorium on home foreclosures (plus a previously announced closing of a loophole in bankruptcy laws – opposed by McCain) to allow people to stay in their first (and for most, their only) home) will give many some room to breathe. The tax credit for business will increase jobs, as well as increased money for cities to spend on construction and infrastructure (also previously announced). And finally, if I had no option but to withdraw money from my 401k (not a good idea – I also like the sensible $10K limit), I’d rather not pay McCain’s 10% tax when I don't have a job.
Just listen to US and help US.
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