WASHINGTON — President Donald Trump said Monday there will not be changes to tax-deferred retirement savings plans under his proposed tax overhaul, short-circuiting reports that House Republicans were considering sharply capping one of the most popular breaks.
“There will be NO change to your 401(k),” Trump said Monday on Twitter. “This has always been a great and popular middle class tax break that works, and it stays!”
Trump’s declaration is the first time he has weighed in specifically on this portion of the tax overhaul debate. Congressional negotiators had been considering reducing the cap on the annual amount workers can set aside for their 401(k) accounts to help offset the cost of a massive income tax cut, the New York Times reported Friday.
Workers now can put as much as $18,000 — or up to $24,000 for workers over 50 — in those accounts each year without paying taxes first.
The Times reported congressional negotiators were considering a cap of just $2,400 — and that any contribution over that would be directed to a Roth account and taxed immediately.
The idea faces opposition beyond Trump. In response to a question, Chuck Grassley, R-Iowa, who is a key member of the Senate Finance Committee said he, for one, is also opposed.
“The tax reform framework’s stated goal is to maintain or raise retirement plan participation of workers and the resources available for retirement. I agree with that goal. Saving, planning and frugality should be rewarded,” Grassley said in a statement.
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Wall Street has been girding for possible changes to the lucrative 401(k) industry, which in recent decades has funneled trillions of pretax dollars from workers’ paychecks into stocks, bonds and other financial assets.
Trump has made tax cuts the centerpiece of his legislative agenda and issued a broad framework in September that, among other things, called for a reduction in the corporate income tax rate to 20 from 35 percent. He also repeatedly has said that the middle class must benefit from the tax cuts.
At the same time, Trump has sought to highlight the rise in the stock market during his presidency, tweeting at least seven times in the last week about it.
Republicans have so far struggled to find offsets for the steep tax cuts they have offered to both individual and corporate tax rates.
After seeking to eliminate the tax deduction for state and local taxes, Republicans may be considering changes to ensure that middle-class Americans don’t actually end up with a tax increase.
The Senate adopted a 2018 budget resolution last week allowing for increasing the deficit by about $1.5 trillion — before considering any economic growth that might come from the changes.
The House may vote as soon as this week on the Senate resolution, which is a crucial step to passing a tax bill with only Republican votes.
Ed Tibbetts of the Quad City Times contributed to this report.