The President's Twitter veto of a bad tax idea
Some members of Congress working on a tax reform package were considering changing the rules on how much money American workers could save for their retirements through 401(k) plans. The idea was to put a cap of around $2400 on contributions to the plans. The aim: to raise more than $100 billion in new tax revenue for Uncle Sam.
“There will be NO change to your 401(k). This has always been a great and popular middle class tax break that works, and it stays!”
Here, here, Mr. President. As National Review's Jim Geraghty notes:
The 401(k) account is an incentive for Americans to save for the future and not rely on the government to support them in their golden years. It promotes thrift, long-term planning, and deferred gratification. It adds millions of non-wealthy Americans to the “investor class.” As one financial firm put it, “Uncle Sam doesn’t offer many gifts. This is one. The upside: free money.”
The New York Times reported Friday that House Republicans were considering a plan to sharply reduce the amount of income American workers can save in tax-deferred retirement accounts as part of a broad effort to rewrite the tax code. Right now, you can put up to $18,000 in 401(k) accounts and not pay taxes on that money, $24,000 if you’re over age 50. (The IRS recently announced that the limit will go up to $18,500 next year.)
The Times article reported that one of the ideas under consideration was reducing the annual amount workers can set aside to as low as $2,400. Eliminating the tax break for 401(k)s entirely in 2018 would generate $115 billion in new revenue. Our Andrew Stuttaford rightly labeled this idea “idiocy” and it’s such a bad idea, it’s fair to wonder just how seriously this was considered. It’s usually voices on the Left that want to eliminate the tax incentives for saving money.
We get the push to eliminate tax breaks that are either bad economic policy or have no common sense reason to exist. The tax code is littered with giveaways to this, that, and the other special interest, and each of those breaks should be scrutinized.
But floating the idea of punishing millions of workers saving for their own retirements -- particularly when private sector pensions are largely a thing of the past -- isn't just idiocy, it's cruel.
Again, good on the President for publicly dissing the idea...and saving congressional Republicans from a potential disaster.