GOP Tax Plan Could Cap Retirement Savings

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The Republicans’ tax plan could contain a provision that would cap the amount of money individuals can pay into 401(k) retirement savings accounts.

Business Insider noted that the House Ways and Means Committee is considering imposing an annual limit of $2,400 for deposits into 401(k) accounts, with additional savings having to go towards a Roth account.

Roth accounts tax funds when money is deposited, while 401(k) accounts are taxed only when the money is used. When people retire, they are often on lower incomes and fall into a lower tax bracket. The change would therefore result in greater tax revenue for the government.

For 2017, the annual limit for deposits into 401(k) accounts is $18,000 for those under 50 and $24,000 for people aged over 50.

The report follows the Oct. 19 Senate passage of a budget bill which allows the deficit to rise by $1.5 trillion over the next 10 years. However, the GOP’s initial tax plan calls for $2.2 trillion in tax cuts. Increased taxes from retirement savings could be a way to plug this gap.

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Although the House and Senate have adopted different budget bills, Republican Rep. Diane Black indicated that the Senate bill could be accepted by the House.

"In the House, I look forward to swift passage," she said following the Senate vote, according to The New York Times.

House passage could prove difficult, though. House Republicans have been pushing for a budget that contains no increase in the federal deficit. If they want to avoid a Democratic filibuster in the House, Republican representatives must pass an identical bill to the one adopted by the Senate.

While there is much work to be done to implement tax cuts, President Donald Trump and other Republicans welcomed news that the Senate agreed on a budget framework Oct. 19.

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"Great news on the 2018 budget [Senate Majority Leader] McConnell - first step towards delivering massive tax cuts for the American people!" Trump wrote on Twitter Oct. 20, according to The Washington Post.

McConnell tweeted that the Senate "is ready to provide tax relief and help bring jobs back to America."

However, the Post pointed out that the GOP is following the same procedure it took when it tried to repeal Obamacare without any support from the Democrats. With a 52 to 48 majority in the Senate, Republicans could struggle to pass a tax reform bill when it is ready.

The paper also reported that pressure is growing on Republicans to secure their first legislative victory since Trump took office. Sen. Lindsey Graham noted that if the GOP fails on tax reform, it "will be the end of us as a party."

Sources: Business Insider, The New York Times, The Washington Post / Featured Image: Gage Skidmore/Flickr via Wikimedia Commons / Embedded Images: Gage Skidmore/Flickr via Wikimedia Commons, Gage Skidmore/Wikimedia Commons

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