House GOP tax leader threatens to break Trump’s promise not to change 401(k) rules – Washington Post
House Ways and Means Committee Chairman Kevin Brady (Melina Mara/The Washington Post)
House Ways and Means Committee Chairman Kevin Brady on Wednesday suggested a tax bill he is preparing to introduce could force changes to 401(k) plans and other retirement accounts, potentially bucking a promise from President Trump that those accounts would be left alone.
Brady, speaking at a breakfast hosted by the Christian Science Monitor, said “we think in tax reform we can create incentives for people to save more and save sooner.”
He said he was “working very closely with the president,” but he also said many people who have tax-incentivized retirement accounts contribute $200 per month or less, a level he thought was too low.
“We think we can do better,” he said. He added “we are continuing discussions with the president, all focused on saving more and saving sooner.”
Economists and financial advisers often urge people to begin saving for retirement as soon as possible because investment savings grows much faster when people can begin setting aside money at a younger age. But Brady wouldn’t go into any details about how he planned to change incentives to encourage more savings. Rather, he suggested that the current construct of 401(k) accounts and Individual Retirement Accounts was not working well.
Brady’s comments come just one week before he is planning to introduce his tax bill, which Republicans hope will lead to the most sweeping changes to the tax code in more than 30 years. But almost all of the key details of the tax bill remain a mystery. Again and again on Wednesday, Brady said the most pressing decisions have not been reached.
For example, he said he hasn’t decided what income levels would merit certain tax rates.
He said he hasn’t decided how many tax deductions to eliminate to partially offset the lower rates.
He said he hasn’t decided whether to impose a top tax rate for the wealthiest Americans.
He said he hasn’t decided whether the tax cuts would be retroactive to income earned in 2017.
He wouldn’t say how the tax bill would impact the type of taxes paid by hedge fund managers, even though Trump has promised to eliminate their special preferences.
“In about a week, you will be able to see the reforms proposed and where we are heading with it,” he said.
He also said he couldn’t guarantee that every American would see their taxes go down because of the changes, but he could “guarantee that every American will be better off because of a simpler tax code that lowers those rates and improves their paychecks.”
This political cautiousness is infuriating some Republicans, who feel that too many details are being kept secret too late in the process. Brady and GOP leaders want to pass the tax cut bill by the end of the year, but some lawmakers are threatening to try to block a vote on a House budget resolution on Thursday if they don’t have more details. A number of lawmakers from New York and New Jersey are concerned that the tax plan could eliminate the ability of people in their state to deduct state and local taxes from their federal taxable income.
Brady said Wednesday that discussions about this are ongoing, and there was a meeting with concerned lawmakers Tuesday night. He said he is hopeful the issue will be resolved, but he did stop short of assuring reporters that the budget resolution would pass by Thursday. Republicans need to pass the budget resolution to ensure they can eventually pass a tax cut bill without needing support from Democrats in the Senate.
Trump on Monday said in a Twitter post that no changes would be made to the treatment of 401(k) plans after rumors that changes could be made, but House and Senate leaders have so far refused to accept his proclamation.
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!
— Donald J. Trump (@realDonaldTrump) October 23, 2017
These accounts allow people to contribute up to $18,000 a year pretax as a way to incentivize saving for retirement. Lowering the tax-free threshold could raise more revenue, but it could also rankle voters. In 2015, more than 50 million Americans had active 401(k) accounts.
House Republicans are hopeful that Brady will be able to pass his bill by the end of November, then moving the process over to the Senate. Brady said adjustments to his bill will likely be made continuously to build support.
Even though many details remain unresolved, the White House and GOP leaders are aiming to write tax bills that meet several key targets. They want to lower the top corporate tax rate from 35 percent to 20 percent, collapse the number of income brackets paid by families and individuals from seven to three, and eliminate the estate tax and the alternative minimum tax.
Democrats and a number of budget experts have said the GOP tax plan would predominantly benefit the wealthiest Americans, with some taxes actually going up on the middle class and upper middle class. Brady dismissed these concerns, telling people to study the bill he introduces next week.
He said that after the tax cut measure becomes law, he will pivot his attention next year into dismantling the Internal Revenue Service through a process he described as a “bust up [of] the IRS as it is today.” He said he wants the focus of the changed agency to be “focused on that simpler, fairer tax code” that is left behind by their bill.
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