US. Will the GOP destroy the 401(k)?
Republicans are ready to take on tax reform. And to make the numbers work, they may radically change the way your retirement savings are taxed.
Both the Trump administration and the congressional GOP want to slash tax rates for individuals and corporations. The problem is that that strategy will lose the government money, and any bill passed by reconciliation — a procedural move in the Senate that avoids the filibuster — must be deficit-neutral over the long term. Republicans want to pass tax reform via reconciliation so they can avoid negotiating with Democrats.
That’s sent them scrambling to look for revenue replacements to offset dropping tax rates. “Options include capping the mortgage interest deduction for homeowners; scrapping people’s ability to deduct state and local taxes; and eliminating businesses’ ability to deduct interest,” Politico reported.
But one idea is particularly eyebrow-raising: changing 401(k) savings accounts so that contributions are taxed up front. It’s unclear if the change would apply to traditional IRAs as well, but it might.
As a way to close the revenue hole, the idea is really gimmicky. It could also upend the way Americans save.
Read full news here: The Week
