The Gang of Six proposal would raise $1 trillion in revenue by reducing tax incentives, including those for retirement savings. We are very concerned that the proposal lumps retirement savings incentives, which are tax deferrals not exclusions, into the same pot as other incentives classified as tax expenditures. In reality, traditional retirement savings tax incentives don’t eliminate income tax on retirement savings, they defer payment of income tax until workers retire and benefits are paid out. The cost of the incentives is overstated because most of the deferred taxes will be paid after the short-term window used in Washington’s budget scoring . Failure to recognize this bad budget math could decimate savings rates where Americans save most—at work. (ASPPA Tax Expenditure Study—May 2011)We urge Congress to tread carefully. Raising short-term revenues by reducing the tax deferral incentives created to provide retirement security for millions of American workers and retirees is not in the long-term interest of American workers or their children.”
By reducing the limits to retirement plans we would increase the retirement crisis going forward. This is a deferral not a reduction.
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- ASPPA Study Says Bad Math Targets 401(k) Plans (prweb.com)
- Tax Credits, Deductions, and Deferrals (education.com)
- 6 Little-Known 401(k) Perks (money.usnews.com)