How Congress Made Sure the Rich Retire in Luxury—at Taxpayer Expense

Lily Lambie-Kiernan

How Congress Made Sure the Rich Retire in Luxury—at Taxpayer Expense

Diane Weiss and Kristen Svihlik live 1,700 miles and a generation apart. Weiss, 60, is twice divorced with a grown daughter, and resides by herself in a one-bedroom apartment in Mesa, Arizona. Svihlik is 38 and lives in a fixer-upper in Akron, Ohio, with her husband, their 6-year-old son, and a newborn daughter. The two women have never met, but they uttered precisely the same words to me on the exact same day: “I’m going to have to work until I die.”

That is not an uncommon sentiment in America today, where a relative few have enough money socked away to see them comfortably through the so-called golden years. The Federal Reserve’s latest survey of consumer finances (SCF) shows that among the poorest 50 percent of families, less than a third participated in a tax-subsidized retirement plan in 2019, while 91 percent of families in the wealthiest 10 percent did.

The federal data (for technical reasons) excludes traditional company pensions, which have been increasingly replaced by “defined contribution” plans like 401(k)s and 403(b)s that shift the savings burden from employer to employee. And while that shift may account for some portion of the chasm in savings, the vastness of today’s retirement wealth gap is largely the result of a string of Wall Street–backed tax incentives that have been a mother lode for the rich but of little use to the poor. Based on the SCF results, Steven Rosenthal, a senior fellow at the Urban-Brookings Tax Policy Center, calculated that the average family in the bottom half of the wealth spectrum held just $6,900 in retirement savings, including individual retirement accounts (IRAs), while the wealthiest 10 percent of families averaged $861,300.

This 125-to-1 disparity is astonishing, considering the vast amount of revenue tax collectors give up in the name of helping families build their nest eggs. Retirement-­related incentives will cost a total of $1.9 trillion from 2020 to 2024, according to the congressional Joint Committee on Taxation (JCT), making them the US government’s single biggest tax-related expense—more than twice the $1.85 trillion price tag of the 10-year Build Back Better plan that Sen. Joe Manchin rejected in December, and more than the cost of federal tax breaks for dependents, charitable donations, and capital gains combined. “It’s unbelievable the amounts of dollars at stake, and how tilted they are to the high end,” Rosenthal says. “It’s just staggering.”

[Read the rest at Mother Jones.]