Bartimoro on MTP: All Taxes Not Equal

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  • The problem with Ms. Bartiromo’s argument is that she doesn’t know how pension funds and 401(k)’s are taxed. The pension funds and 401(k) accounts are NOT taxed on dividend income or any other income. The assets in these retirement vehicles are taxed only when they are distributed to beneficiaries, and then at the beneficiary’s ordinary income rate. The ordinary income rate applies whether the pension fund or 401(k)’s assets are due to dividend income, investment income that would have qualified for long or short term capital gains treatment or ordinary income. I’m frankly shocked that: (1) Ms. Bartiromo as a prominent financial report doesn’t know this, and (2) that Jim Cramer and Grover Nordquist sat by and didn’t correct such an obvious error. For the tax treatment of retirement plans, please consult this IRS publication: