With the release of its 2016 spending blueprint Monday, the Obama White House officially signaled its intent to use retirement policy to raise taxes on the wealthiest Americans. 

The proposed 10-year budget, which allots $4 trillion in spending for fiscal year 2016, will attempt to cap tax-deferred saving in 401(k) and Individual Retirement Accounts at about $3.4 million. 

That amount of savings generates more than $200,000 of income annually in retirement when annuitized, an income stream that should be sufficient for most, according to the Obama administration’s rationale behind the proposal.

The vast majority of Americans would never feel the cap. In 2011, only one out of every 1,000 Americans had more than $3 million in their retirement accounts, according to the Employee Benefit Research Institute. That said, many in the industry oppose it, especially in light of concerns over rising interest rates.

“Politically, it is convenient to target people who have saved $3.4 million,” Klein said. “But the devil is in the details when you look at the impact on younger workers and the inevitability that interest rates will rise over the coming decades.” 

The problem is that annuity prices vary with interest rates because insurance companies buy bonds to finance pay-outs. When bond yields are low, as they are now, annuities are more expensive. Right now a 10-year Treasury bond yield is just 2 percent. If it jumps to 5 percent (the rate in 2006), that $205,000 annual annuity would only cost $2.2 million. 

The cap is a relatively small gambit in the budget’s larger effort to raise revenues by increasing capital gains taxes, inheritance taxes, and taxes on foreign revenue streams of U.S. multinational companies.

 

See also: 6 top tax changes for 2015

The budget also purports to stimulate middle-class incomes with a series of spending initiatives and tax cuts. 

New retirement regulations in the budget would also make it easier for workers to save for retirement through their employers by giving 30 million more workers access to IRAs in which they are automatically enrolled, according to a fact sheet published on the White House’s Office of Management and Budget site.

Investment Company Institute President and CEO Paul Schott Stevens said his organization “strongly opposed” any limits on retirement-savings incentives.

“Policy changes of this kind are simply wrongheaded. … The administration’s proposals would penalize workers trying to set aside a nest egg for retirement, discourage employers from offering retirement plans, and add unnecessary complexity to retirement savings.”

A recent ICI survey found Americans overwhelmingly oppose changing tax incentives for retirement savings. 

The ICI also expressed its opposition to Obama’s auto-IRA proposal. “We oppose mandates on employers,” it said.

The Insured Retirement Institute, on the other hand, applauded Obama for including “sensible solutions for expanding access to retirement plans, such as auto-IRAs, for American workers who do not have a workplace plan available to them.”

“Policies like this can go a long way toward helping Americans plan for their future financial security,” IRI President and CEO Cathy Weatherford said.

Missing from the White House’s fact sheet was any mention of Social Security reform. 

Republican Rep. Paul Ryan, chairman of the House Ways and Means Committee, expressed no surprise on that point. 

“It’s hard to imagine the president is going to want to work with Congress on entitlement reform,” Ryan told the New York Times. “He’s been stifling it all along. I see that as an issue that’s going to require a new president.” 

Ryan was critical of the budget’s proposal to limit tax-deferred retirement savings and other tax increase initiatives, calling them “envy economics” and suggesting the White House should brace for a fight with Congress. 

Bloomberg News contributed to this report.