While the White House is vowing to have a tax reform package on the Senate floor by November, few details have emerged as to exactly what it will look like.
What is known is that the tax-preferred treatment of contributions to qualified retirement plans is still under discussion, according to Marc Short, the White House legislative affairs director.
Short’s comment was made Monday at a forum on tax reform hosted by Americans for Prosperity, a conservative activist group, that included Treasury Secretary Stephen Mnuchin.
(Related: 5 Reasons Tax Reform Is Still Alive)
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Offering no specifics, Mnuchin made repeated guarantees that reform will happen this year.
He also underscored that tax reform is a linchpin to the Trump administration’s pro-growth agenda. By simplifying the code, reducing corporate and business tax rates, and lowering individual rates it aims to stimulate overall economic growth and wage inflation for the middle and working classes.
While the wealthiest Americans would see their individual rate reduced, Mnuchin said they would not necessarily pay less in taxes, as reform will eliminate most of the deductions that the secretary said largely benefit top earners.
“Rich people have been able to take advantage of the tax code,” said Mnuchin. “This is not about a tax cut for the rich. It’s about tax simplification.”
Mnuchin’s message to special interests: Be prepared to not get everything you want.
The retirement services industry is mounting an aggressive campaign on Capitol Hill to protect the tax-preferred treatment of contributions to 401(k)s and IRAs.
Plan and IRA contribution deductions will cost about $670 billion in forgone revenue between 2016 and 2020, according to the nonpartisan Joint Committee on Taxation, which advises Congress with research on the tax code.
Last week, a joint statement from the White House and congressional leaders said reform would not include a new border adjustment tax, a primary pay-for in the House Republican Blueprint on tax reform, released last year. That new tax on imported goods was expected to raise $1.2 trillion in revenue over 10 years.
It was also the largest offset to the blueprint’s goal of slashing the corporate tax rate from 35% to 20%, which the nonpartisan Tax Policy Center estimates will cost $1.8 trillion over 10 years.
With that major pay-for scrapped, the tax break on contributions to qualified retirement plans may be an all the more attractive source of revenue.
Will Hansen, senior vice president of retirement policy at the ERISA Industry Committee, doesn’t think lawmakers will stoop to tap a popular individual deduction to pay for a break in the corporate rate.