401(k)s safe, Trump assures
President rules out possibility of savings cap in tax plan
WASHINGTON — President Donald Trump said Monday that his tax plan would not prompt any changes to Americans’ tax-deferred retirement plans, pushing back against reports that Republicans are weighing a proposal that would significantly reduce the income workers can save in the popular programs.
“There will be NO change to your 401(k),” Trump said in a Twitter post.
Republicans’ ability to win passage of a tax package hinges on its ability to maneuver through a complex set of legislative restrictions in the Senate. Republicans are attempting to cut business tax rates deeply and also to reduce individual tax rates, using a legislative route that allows them to bypass a Democratic filibuster and pass a bill with a simple Senate majority. To do that, they will need to make some tough political choices, eliminating some popular tax breaks or employing some budgetary accounting tricks in order to offset lost revenue from rate cuts.
Trump’s tweet concerned one of those accounting maneuvers, which would allow Republicans to effectively borrow tax revenue from the future to offset some rate cuts today. Reducing 401(k) contribution limits would force
retirement savers to pay more in taxes today, as they sock away money, but less in the future, when they begin withdrawing retirement funds taxfree.
Even before Trump’s tweet, Republicans had not decided whether to include a reduced cap on contributions in their final version of the tax bill.
Details of the Republicans’ tax bill have been closely held, and they would not comment Friday about possible changes to 401(k) policies. It was not clear from Trump’s Twitter post Monday whether he meant that he would not support a bill including alterations to 401(k) limits or that he knew the Republicans’ draft bill did not include such changes. Several sources said last week that such changes were under consideration as House Republicans prepare to release a tax bill in the coming weeks.
Critics of Trump’s tax plan have said it would not help middle-class Americans, despite White House and Republican promises.
“Tax cuts for corporations and the wealthiest Americans should not be paid for by increasing taxes on middle class Americans saving for retirement,” a group of Democratic senators, led by Sen. Sherrod Brown of Ohio, wrote to the administration in September.
Republicans are discussing proposals that could cap worker contributions at $2,400 annually for 401(k) retirement accounts, lobbyists and consultants have said. Currently, workers can put away $18,000 a year in tax-deferred plans; workers who are over 50 years old can save up to $24,000.
Advocacy groups have sprung up in Washington to fight any proposed change to 401(k) limits. One of those groups, the Save our Savings Coalition, said in a statement Monday that it was “thrilled to see the President’s statement today, though we will continue to fight to ensure lawmakers do right by the middle class by preserving and expanding our retirement system as tax reform moves through Congress.”
Wall Street has been girding for 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.
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 past week about rising markets.
“Stock Market hits another all time high on Friday. 5.3 trillion dollars up since Election,” Trump tweeted on Saturday.
House Republicans must first pass a budget this week so they can turn their attention to tax legislation. Trump warned Sunday that action on taxes is crucial to avoiding political failure in 2018.
He personally implored House GOP members on a conference call to swiftly adopt the budget that was passed last week by the Senate, with the hope of clearing the way for tax cuts.
Trump told the lawmakers they were on the verge of doing something historic, according to one Republican official.
Another GOP aide familiar with the conversation said Trump told the members again and again that the party would pay a steep price in next year’s midterm elections if it failed to pass his plan. The president also said multiple times that his plan was the right thing to do for the country, the person said.
The Trump proposal would slash the corporate tax rate to 20 percent and double the standard deduction used by most Americans.
On the conference call Sunday, House Speaker Paul Ryan told members that he hoped to pass the Senate version of the budget bill this week to increase the chances that tax changes can be enacted by the end of
the year.
The leaders emphasized the need for the House to pass the Senate budget to avoid negotiations between the two chambers that could slow the process, said two lawmakers on the call, who also spoke on condition of anonymity. They said the goal is for House passage of the budget this week, putting it on track to approve a tax bill by Thanksgiving. But lawmakers have yet to work out crucial details of the plan, including which income levels would be framed by new tax brackets.
Trump will work to gain support for the plan on Capitol Hill today at a lunch with Senate Republicans. He said he’ll be available to talk with members about the tax bill, one lawmaker said.
RALLYING FOR SUPPORT
On Monday, the president’s daughter and White House adviser was in Pennsylvania to rally support for the tax-cut proposal.
Ivanka Trump joined U.S. Treasurer Jovita Carranza and former U.S. Rep. Nan Hayworth, R-N.Y., for an hourlong event at a senior citizens center outside Philadelphia. During the discussion, she referred to tax legislation as “critical” and touted the proposed changes to the tax code as changes that will help everyday Americans.
“There are many elements of this tax plan that I think are squarely targeted at creating jobs and growth in this country and offering relief to our middle-income families,” she told the audience. “This is about the recognition that, as a country, we have to have policies that mirror our values. We have to encourage the next generation to be competitive and compassionate. For me, I think this couples together our core values as a country.”
Ivanka Trump, as part of the tax-overhaul effort, has been focused on promoting a plan to expand the child tax credit, which she highlighted Monday as “well-designed” and “not prescriptive.” She drew on her own life experience to connect with the audience, describing herself as a mom who has an understanding of the challenges parents face with the rising cost of child care.
“Every parent has to manage the competing demands of raising a family and their passions,” she told the crowd. “I, too, had to manage that, but I am far more fortunate than most. I had help, and I recognized that I wouldn’t be able to do even a small fraction of what I was able to do professionally or as a parent … if I didn’t have access to the means to be able to put my children in a secure and safe and protected and nurturing environment.”
Increasing the child tax credit, she said, could mean the difference between sending a child to an after-school program or paying for quality day care — and could even aid some young couples wrestling with whether they can afford to start a family.
Details on how much the $1,000 child tax credit should increase have not been settled, and Ivanka Trump has not publicly offered a number.
Ivanka Trump also said the tax proposal would benefit small businesses.
“If you level the playing field, nobody’s going to beat the spirit of the American worker,” she said. “No country is more innovative. But our corporate rates are dramatically higher than our prime competitors in the developing world. We want people to be choosing America not just because it’s their preferred place to locate but because it makes sense.”
Information for this article was contributed by Eileen Sullivan of
The New York Times; by Jill Colvin, Alan Fram, Erica Werner and Errin Haines Whack of The Associated Press; and by Toluse Olorunnipa, Miles Weiss and Sahil Kapur of Bloomberg News.