Richard Thaler and 401(k) contribution limits

This is Joseph

Richard Thaler is narrowly correct in that reducing contribution limits to 401(k) accounts would be progressive.  Duncan Black points out that the implicit trade-off here is is with the estate tax, and not with something like Children's Health (look at the delays in funding CHIP).  Clearly the estate tax is much more progressive than the 401(k) contribution limit and has the desirable property of preventing wealth concentration.

So it is all about the net changes in policy.  If the 401(k) contribution limit was reduced to fund an increase in social security payments (focused on those with lowest benefits) then it would be a very progressive change in policy.  If it funded another worthy program that could also be a decent trade.

But any plan that has room to potentially eliminate the estate tax is hardly progressive, on net, and should be viewed with appropriate skepticism.