One Bullet Dodged; More Expected (Editorial)

by Arkansas Business Editors  on Monday, Nov. 6, 2017 12:00 am   2 min read

That collective sigh you heard Thursday morning was that of millions of Americans relieved to learn that the U.S. House of Representatives had no plans to change the rules on 401(k) accounts, that tax-deferred mechanism that millions of Americans are depending on to fund their retirements.

The death of the defined benefit pension plan in the United States heightens the importance of 401(k)s. Early reports on the Republican plan to overhaul the tax code said that they were considering cutting the maximum income that workers could stash, tax-deferred, in their 401(k)s, from $18,000 annually ($24,000 for workers over 50) to $2,400.

The Tweeter in Chief sought to allay concerns, posting to Twitter: “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!”

It was one of the few tweets by President Trump that was actually reassuring to a majority of Americans.

As for the rest of the House proposal unveiled Thursday — the big news is the cut in the corporate tax rate from 35 percent to 20 percent and the reduction in individual tax brackets from seven to four, moves that should please business and Americans longing for a simpler code.

But it also proposes eliminating or changing a number of tax breaks popular with the middle class, including the deduction for state and local income and sales taxes, a move that hurts Americans in states with high income taxes.

Congress is aiming to keep the cost of the tax overhaul to $1.5 trillion over a decade, a cost that the GOP says will be covered by the surge in economic activity sure to result. As always, the devil is in the details. (Or maybe it’s God is in the details; we’ve heard it both ways, but with Congress involved, we’re sticking with the devil.)

 

 

Please read our comments policy before commenting.