WASHINGTON — President Donald Trump and Republicans were at odds on Wednesday over changing the 401(k) retirement program to help finance tax cuts, with the president insisting the middle-class favorite will remain untouched and lawmakers open to revisions. ADVERTISING WASHINGTON
WASHINGTON — President Donald Trump and Republicans were at odds on Wednesday over changing the 401(k) retirement program to help finance tax cuts, with the president insisting the middle-class favorite will remain untouched and lawmakers open to revisions.
Rep. Kevin Brady, the chairman of the House’s tax-writing panel, wouldn’t rule out changes to the program used by 55 million U.S. workers who hold some $5 trillion in their 401(k) accounts, a system that has become a touchstone of retirement security for the middle class.
Earlier this week, Trump promised the program would be left alone, and appeared to bolster that pledge Wednesday, saying he moved swiftly to end speculation that the tax-deferred program may be changed because it’s vital for working Americans.
But he went on to muddy the waters, when asked about Brady’s statements hours earlier.
“Maybe it is, and maybe we’ll use that as negotiating,” Trump said during an impromptu news conference as he left the White House for a trip to Texas. “But trust me … there are certain elements of deals you don’t want to negotiate with … and Kevin knows it, and I think Kevin Brady is fantastic, but he knows how important 401(k)s are.”
Brady, head of the House Ways and Means Committee, said earlier Wednesday he’s discussing the issue with Trump, who had shot down the possibility of changes on Monday.
And a senior Republican senator signaled he’d vote for a tax bill even if it crimped 401(k) tax benefits.
The nearly $6 trillion GOP plan calls for steep tax cuts for corporations and promised reductions for middle-income taxpayers, a doubling of the standard deduction used by most Americans, shrinking the number of tax brackets from seven to three or four, and the repeal of inheritance taxes on multimillion-dollar estates. The child tax credit would be increased and the tax system would be simplified.
Crucial details of the plan have yet to be worked out.
An Associated Press-NORC poll released Wednesday found most Americans saying Trump’s tax plan would benefit the wealthy and corporations, and less than half believing his message that “massive tax cuts” would help middle-class workers.
With Republican leaders battling to show themselves as true standard bearers for the middle class, eyeing next year’s midterm elections that are deemed essential to retaining their majority, the 401(k) issue has become a flashpoint. GOP lawmakers have been considering changes to the 401(k) structure, such as limiting the amount of tax-deferred contributions employees can make, as a way to help finance tax cuts.
Asked whether the retirement savings program was still a possible target, Brady said, “We’re working very closely with the president.”
“We think, in tax reform, we can create incentives for Americans to save more and save sooner, which can help them,” Brady told reporters at a Christian Science Monitor breakfast. “So we are exploring a number of ideas in those areas. … We are continuing discussions with the president, all focused on saving more, saving sooner.”
Brady’s counterpart in the Senate, Republican Orrin Hatch of Utah, also indicated possible changes to 401(k)s remain on the table. “I’m open to looking at anything,” he said.
Another senior member of the Senate Finance Committee, Sen. Chuck Grassley, R-Iowa, went further. He said although he’s opposed to reducing 401(k) tax benefits, he’d vote for such a bill if the overall legislation brought the needed tax overhaul and cuts. “We’ve got to have tax reform, and I can’t fall on the sword for one issue,” Grassley told Iowa reporters on a call.
Rep. Richard Neal, the senior Democrat on the Ways and Means Committee, said of the Republicans, “Right now, even as we speak, they appear to be going wobbly on some of the issues they’ve raised with great certainty in previous weeks.”
The Republicans are straining to find new revenue sources to pay for anticipated tax cuts exceeding $1 trillion.
While keeping open the possibility of changing 401(k)s, Brady also said he continues to seek a compromise with rebellious GOP lawmakers from high-tax states over the tax plan’s proposed elimination of the federal deduction for state and local taxes.
“I do expect to reach an agreement with our high-tax (state) lawmakers,” Brady said. “We’re making good progress.”
One compromise being considered would cap the state-local deduction at a single taxpayer’s adjusted gross income of $400,000 and $800,000 for a married couple.
The deduction is a widely popular break used by some 44 million Americans, especially in high-tax, Democratic-leaning states like New York, New Jersey, Illinois and California.
