WASHINGTON – President Donald Trump on Monday dismissed the possibility of curbing a popular tax-deferred U.S. retirement savings program to help pay for sweeping tax cuts, and expressed doubts about adding another top bracket targeting the wealthiest Americans.
The potential scaling back of the 401(k) plans, which for four decades have helped Americans save for retirement, is one of several important details yet to be worked out in a major tax overhaul that Trump promised as a candidate and wants his fellow Republicans who control Congress to pass by year’s end.
The White House and its allies in Congress have floated the idea of paring back a number of tax deductions to generate revenue lost as a result of their proposed tax cuts, the centerpiece of which is a sharp reduction in the corporate income tax rate.
The Wall Street Journal and the New York Times reported on Friday that Republicans were considering an annual cap of about $2,400 on pretax contributions to 401(k) plans, roughly 13 percent of what workers under age 50 currently can contribute on a tax-deferred basis.
“There will be NO change to your 401(k),” Trump said in a Twitter post. “This has always been a great and popular middle class tax break that works, and it stays!”
Tampering with 401(k) plans, which have largely replaced defined benefit pensions in the United States, would risk alienating millions of U.S. workers as well as Wall Street, which generates fees from managing the plans.
It also would provide ammunition to Democrats, who have painted Trump’s plan, with its $6 trillion in tax cuts, as a gift to the rich and corporate America that would balloon the federal deficit.
Because many companies match a percentage of their employees’ 401(k) contributions, lowering the annual cap could result in a further reduction in the amount saved for retirement in these plans.
Securing congressional passage of his tax overhaul is of critical importance to Trump, who has yet to get any major legislation through Congress since taking office in January, including a major health care overhaul he also promised as a candidate last year.
The White House argues that tax cuts are needed to boost economic growth and create jobs, but has shown increasing sensitivity in recent weeks to arguments that it is endangering America’s long-term fiscal health.
Based on the outline of the plan that was unveiled last month, independent experts have concluded that corporations and the highest earners would benefit the most, and many upper middle-income people would face higher taxes.
There are signs Republicans may add a fourth income tax bracket affecting high earners to the tax blueprint, which envisions collapsing the number of brackets to three from the current seven.
The idea of an additional top tax bracket was floated by Republican House of Representatives Speaker Paul Ryan.
In an interview broadcast on Fox Business Network on Monday, Trump appeared to pour cold water on the idea.
“It may not happen,” Trump said. “The only reason I would have (it) … is if for any reason I feel the middle class is not being properly taken care of.”
There is also pressure from investors to pass the tax overhaul. The expectation of deep tax cuts has helped propel U.S. stock markets to record highs during Trump’s first year in the White House.
Although Republican lawmakers differ widely on what tax cuts to make and how to pay for them, Trump told Fox Business Network he wanted the tax legislation to be approved before the end of the year.
On Tuesday, Trump is expected to participate in the weekly policy lunch of Senate Republicans. He also spoke with House Republican lawmakers on Sunday, the White House said.
Trump said he would press the Republican lawmakers to act on taxes and that he thinks there are enough votes to pass the plan. While its broad parameters have been made public, the detailed legislation has not yet been unveiled.
Senate Majority Leader Mitch McConnell, speaking to CNN on Sunday, would not say whether he would back retirement fund caps, saying it was “way too early to predict the various details.”
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