Capps' Laws: tax, regulate, meddle, pry and spy...

The retirement investment press is vibrating over new federal regulations that will seize sizable portions of 401k accounts and make it very difficult to own gold.

While it took the cooperation of hundreds of congressmen to enact the new provisions – laws and regulations which modify the basic interpretation of the search and seizure provisions of the 4th Amendment and the tax codes that offer incentive to save for retirement – one particular California Congresswoman has come in for severe criticism.

A Santa Barbara member of the New Democrat Coalition, Lois Capps, Dist. 23, is in her 8th term representing a thin strip of beach that extends from Port Hueneme and Oxnard to San Luis Obispo.

She replaced her husband, UC Santa Barbara Divinity Professor Walter Capps, in office in 1997 after his death of a heart attack, won re-election in 1998, and has retained her seat since then with as much as 53% of the vote against Republican challengers.

A member of the Committee on Energy and Commerce, she was a staunch supporter of the Affordable Health Care Act of 2010, and as a member of the Subcommittee on Environment and Economy, she advocates strong environmental regulation as it relates to health issues.

She is known for inserting onerous “provisions” in controversial legislation such as the $800 billion Economic Stimulus Bill of 2008 and the Reauthorization of the Patriot Act.

In a little-known provision governing the tax breaks offered, the $3 trillion a year 401k industry took a severe hit most people don't know about.

In a plan outlined by Teresa Ghilarducci, professor of economic policy analysis at the New School for Social Research in New York, she proposed before the House Education and Labor Committee that to stem the loss of $2 trillion in retirement savings over the previous 15 months, Congress should adopt an alternative plan to offer an inflation-adjusted subsidy from the U.S. government of $600, but would be required to invest 5 percent of their pay into a guaranteed retirement account administered by the Social Security Administration. The money in turn would be invested in special government bonds that would pay 3 percent a year, adjusted for inflation.

The current system of providing tax breaks on 401(k) contributions and earnings would be eliminated.

“I want to stop the federal subsidy of 401(k)s,” Ghilarducci said in an interview. “401(k)s can continue to exist, but they won’t have the benefit of the subsidy of the tax break,” said Ms. Ghilarducci at the time.
When Congress acted, they allowed the new system to be inserted into the stimulus package. The Federal Reserve has the say so on just what the inflation adjustment is. Here's how that works.

Some 301 Democrats and 3 Republicans voted to allow a sliding scale that would let the Fed adjust the rate of inflation at anywhere from 3.4% per year over the next 10 years to 8% per year.

The bite for 3.4% adjustment would be this. One hundred thousand dollars today would be:
$96,711 in one year
$93,531 in two years
$84,605 in 5 years
$71,580 in 10 years

Over a period of 10 years at 8%, the amount would be halved.
$92,593 in one year
$85,734 in two years
$68,058 in 5 years
$46,319 in 10 years

Under the reauthorized Patriot Act, the Treasury Department's sleuths will be allowed to break into safe deposit boxes in order to enforce a law that was designed to prevent people from taking more than 6.5 ounces of gold out of the nation without declaring it.

Subsection (g)(2) provides further: A financial institution, and a director,officer, employee, or agent of any financial institution, who voluntarily reports a suspicious transaction, or that reports asuspicious transaction pursuant to this section or any other authority, may not notify any person involved in the transaction that the transaction has been reported.

Here's how that works.

Section 218 of the Patriot Act is, thus, critically significant. It amends FISA to provide that "foreign intelligence" need not be the purpose of investigations seeking orders under the Act, but merely a "significant purpose." The amendment applies both to FISA electronic surveillance warrants and FISA warrants for physical searches of property. This greatly expands the power of federal authorities to apply the relatively loose standards of FISA to investigations of both U.S. citizens and residents that only tangentially touch on national security.

If federal agents obtain a sneak and peek warrant on information provided by a banker, broker or other financial services provider, neither the informer, nor the government is authorized to reveal the warrant, to inform the subject of the search, or serve the information in advance.

What's more, it's illegal to reveal that one has been the subject of a national security letter or a FISA warrant. You're stuck.

Agents have drilled and broken into deposit boxes to seize gold. The Department of Homeland Security can seize any of the following – bar gold, gold coins, firearms of any kind unless manufactured prior to 1878, documents such as passport or foreign bank account records.
How is it done?

They call it “unclaimed property.” Hey, it's a secret warrant served in secret on people who can't tell under pain of a $500,000 fine and 10 years in the federal penitentiary. I guess they can call it whatever they want to call it.

So far, DHS operatives have used the new provision to seize such assets in California, Idaho, and Delaware, using laws that were originally designed to fight terrorists.