Trump Denies Rumors Of Republican Plan To Cut 401(k) Contribution Limits

As we've pointed out numerous times over the years, Americans are not the best savers with some 97 million people living paycheck to paycheck and nearly 50% of families saying they have less than $1,000 stashed away for the proverbial 'rainy day'.  Given that, it might surprise you to learn that rumors are swirling this morning that Republicans are considering reducing the incentives American families have to save by slashing contribution limits on 401(k) plans.  Per the New York Tmes:

It is unclear if Republicans will ultimately include a cap on contributions in the tax bill that they are expected to release in the coming weeks. Such a move would almost certainly prompt a vocal backlash from middle-class workers who save heavily in such retirement accounts and from the asset management industry.

 

The proposals under discussion would potentially cap the annual amount workers can set aside to as low as $2,400 for 401(k) accounts, several lobbyists and consultants said on Friday. Workers may currently put up to $18,000 a year in 401(k) accounts without paying taxes upfront on that money; that figure rises to $24,000 for workers over 50. When workers retire and begin to draw income from those accounts, they pay taxes on the benefits.

 

Rumors have circulated for months that negotiators were debating including a cap as a way to help offset the revenue loss from a reduction in business tax rates that Republicans have put at the center of their plan. Reducing contribution limits would be, in effect, an accounting maneuver that would create space for tax cuts by collecting tax revenue now instead of in the future.

 

The congressional Joint Committee on Taxation estimates that tax exclusions for individual retirement contributions will cost the federal government $115 billion for the 2018 fiscal year. That is just a fraction of the $1.5 trillion tax cut that Republicans are aiming to enact.

Paul Ryan

As the Times notes, a cap on tax-deferred contributions would likely push Americans into Roth IRA where earnings are taxed immediately but not on withdrawal...that is until a new wave of Americans start withdrawing that money tax-free in 40 years and the rules have to be re-written all over again.

Such a move would be likely to push Americans to shift their savings to so-called Roth accounts, where contributions are taxed immediately, and not when they are drawn out as benefits. That would increase federal tax receipts for the short run.

Not surprisingly, Democrats have used the rumors to orchestrate a media campaign alleging a Republican attack on middle class working families.

Democrats have seen firsthand the perils of proposing changes to savings accounts. In 2015, an outcry forced President Barack Obama to quickly back off his proposal to change the tax benefit of college savings plans known as 529 accounts.

 

On the Senate floor on Thursday, Senator Gary Peters, Democrat of Michigan, warned that the Republican majority was “keeping open the possibility of raising taxes on Americans who are trying to save for their retirement.”

 

In a statement on Friday, Representative Richard E. Neal of Massachusetts, the top Democrat on the Ways and Means Committee, said that the Republican proposals “would hurt those saving responsibly for retirement at a time when an alarming number of families have fallen behind in their retirement savings.”

Meanwhile, Trump has vehemently denied the 401(k) rumors this morning over Twitter.

So, what say you?  Fake news or are 401(k) plans about to get slashed in favor of corporate tax cuts?

Comments

techpriest InsaneBane Mon, 10/23/2017 - 09:38 Permalink

Almost, but still wrong.

The majority of people voted for nobody. It was roughly 25% for both Trump and Clinton. Either way the election went, you had maybe 1/4 of the people giving approval, 3/4 not giving approval, and I would wager that most of the 1/4 didn't actually like that candidate, but were merely afraid of the other candidate.

So, 3/4 of Americans did not support Trump or Clinton, and within the voters, maybe a substantial fraction was voting against the major candidate instead of for a desired candidate.

The bottom line here, is that Hillary Clinton did not win the popular vote because at least 75% of the population didn't vote for her, and once you factor out the "anti Trump but not pro Clinton" votes, that number might be 85-90%.

IOW, the popular vote for president is a charade, and you probably don't even know who your Congressman or City Council folks are.

In reply to by InsaneBane

GeezerGeek techpriest Mon, 10/23/2017 - 13:46 Permalink

In all the elections from 1968 to the present, there was only one candidate I voted for. Every other election I was voting against someone.Of those not voting, I'd wonder how many were disenchanted with both candidates and how many were simply too lazy or apathetic.If you are in the latter category (lazy/apathetic), you shouldn't complain.

In reply to by techpriest

GeezerGeek InsaneBane Mon, 10/23/2017 - 13:40 Permalink

The majority of legitimate voters voted for Trump. And as for the electoral college comment, stop demonstrating your clueless inanity. Algore had a more legitimate claim to winning the popular vote, but was done in by a bunch of stupid voters in a deep blue county in Florida who couldn't figure out how to cast a vote properly on a ballot designed by a deep blue supervisor of elections.

In reply to by InsaneBane

boattrash Stan522 Mon, 10/23/2017 - 09:12 Permalink

Agreed! But let's take it one step further...10% flat tax, across the fucking board for both corporate and personal income taxes, no deductions, no credits, no fucking loopholes, period. Let all  people have the same stake in this shit, w/out regard to income levels.The above plan would shrink the fucking IRS staff beyond belief, take a bunch of bottom feeding CPA and Tax Attorneys out of the mix, and truly streamline the shit out of the fucking headache I'm dealing with in my rare off-time.Edit; Along with a new plan that limits Fed.Gov to spending NO MORE than 9% of above listed flat tax...If they can't afford to pay for a program, shut it the fuck down. Period. (In other words, the cocksuckers in DC need to learn to live like the rest of us).

In reply to by Stan522

insanelysane boattrash Mon, 10/23/2017 - 10:43 Permalink

The graduated tax rate is UN-Constitutional as it is a law that is unequal.  The latest proposals switch it from a graduated system to some other abortion where the low end is low, the high end is low, and the upper middle class takes a big hit.  These are also the 401k people.  I will sue the Federal government as I will be an affected party and I hope all the Trump haters jump on board.

In reply to by boattrash

onewayticket2 Mon, 10/23/2017 - 08:53 Permalink

IF - and I mean IF - Universal Basic Income were to materialize, there really isnt as much need for long term savings (at the same funding level as current) IN THEY EYES OF POLICY MAKERS.....who want the spending to happen NOW (on their watch) just sayin'....Ol Yeller just stated future QE/"extraordinary measures" may once again be needed

GeezerGeek techpriest Mon, 10/23/2017 - 13:30 Permalink

Saving in paper dollars is guaranteed to lose as long as the interest rate (after taxes) is less than the increase in the cost of living. Those dollars I saved from my summer jobs back in the 1960s would have bought a lot more then than they do now. A new basic VW Beetle cost what, $1700 back then?  Now if you had save in silver dollars back then... 

In reply to by techpriest

ZeroPoint Mon, 10/23/2017 - 08:55 Permalink

Hah! First they want all your money in the market to pump up the big guys, now they want you to spend because the universal basic income idea went over like a lead balloon, and the economy is dead, dead, DEAD.I hope they do this. That means more gold for me.   

Smilygladhands Mon, 10/23/2017 - 09:01 Permalink

If ever a Bernie or Warren or other disiple becomes president , God forbid please, it may not be a bad idea to pay taxes on your money now.Of course they will likely figure out a way to tax you twice to pay for thier gov goody bag anyway.  

americanreality Mon, 10/23/2017 - 09:05 Permalink

"Americans are not the best savers"??   Ahhh, so its the people's fault for not saving money they don't have...?  Hard to continue reading past that point.  Remember when you used to be able to earn interest, you weren't clobbered with fees and charges and taxes, when your raises weren't smaller than your COL increases?  Its a predatory economic environment and people are nothing but targets of extraction, whether it's govt or corporations.  

techpriest americanreality Mon, 10/23/2017 - 09:45 Permalink

IMO, "Americans are not the best savers" is in fact the key issue. Politics is downstream of culture - the politicians in power tend to be an expression of the culture.

This is why I'm not surprised that we have people in Congress pushing moronic ideas like state-controlled healthcare (single payer), while at the same time, I can drive on the highway and billboards are advertising 60 months of payments on jewelry. They are simultaneous signs of a sick culture.

In reply to by americanreality

LawsofPhysics Mon, 10/23/2017 - 09:06 Permalink

Totally irrelevant. Ask yourself, what is that 401k priced in?What is the purchasing power of that currency?"Full Faith and Credit"Better raise those rates Mr. Yellen!!!!

GeezerGeek Quivering Lip Mon, 10/23/2017 - 13:15 Permalink

No, because the money all belongs to the government. Taxes are just a way we pretend that we're not slaves.BTW, people get taxed on the money 'contributed' to the Social Security fund. If you're lucky enough to fund your own retirement via income-producing assets, and you also are lucky enough to collect SS, you can get taxed on the SS benefits which, depending on how you look at it, has already been taxed. Likewise, if you're married to someone still employed when you start collecting SS, your benefits may very well be taxable. As I said, all the money belongs to the government. What we are allowed to have is due to government benevolence.

In reply to by Quivering Lip

Harry Vederchi Mon, 10/23/2017 - 09:23 Permalink

Savings are the condition for prosperity and social peace. By saving, high-income people reduce their living standard in the present time and finance investments that increase the overall productivity, hence the wages of the lower income people (who have not done anything to deserve it), which reduces inequalities in the future.But politics plunders the future to bribe the present (Mark Steyn). Politicians in power want money spend here and now, they do not care to leave prosperity for their successors.