House lawmakers are amending their recently released tax bill and senators are considering their own version — said to include “Rothification” of 401(k)s — even as tax analysts are still scoring the House’s plan.
Tax and budget analysts’ views of the House bill, The Tax Cuts and Jobs Act, are a mixed bag, with the Tax Foundation on Monday finding in a state-by-state impact breakdown that the bill would “significantly lower marginal tax rates and the cost of capital, which would lead to 3.6% higher GDP over the long term [and] 3.1% higher wages.”
But analysis performed on the bill by the Committee for a Responsible Federal Budget provides a dire outlook, stating that as a result of the bill, “trillion-dollar deficits would return by 2020 and debt would exceed the size of the economy in just over a decade.”
Citing analysis by the Joint Committee on Taxation, the Committee states that the House GOP tax plan would increase deficits by $1.487 trillion over 10 years. “Those deficits would lead to higher debt, resulting in $270 billion in additional interest costs. As a result, the legislation would add $1.75 trillion to the national debt by 2027.”
Meanwhile, the House Ways and Means Committee started marking up the bill Monday afternoon, with amendments to the bill put forth by Chairman Kevin Brady, R-Texas, regarding carried interest and startup companies.
After wrangling and resistance by President Donald Trump, the House GOP plan did not include changes to 401(k) plans, but Senate Democrats were up in arms on Tuesday over the Senate tax plan including “Rothification” of the savings vehicles.
Sen. Patrick Leahy, D-Vt., led a group of Senate Democrats Tuesday in calling on leaders of the Senate Finance Committee to reject changes to the tax system that would harm existing tax incentives for Americans to save for retirement.
Senate Republicans plan to release their own version of tax reform legislation later this week.
According to the Senate Democrats’ letter, Senate Republicans may be considering making changes to retirement savings incentives, specifically by adopting so-called “Rothification,” which would eliminate or limit the amount of pretax money that can be contributed to 401(k) accounts.
Leahy and other Senate Democrats highlight research showing that workers at all income levels participating in employer-sponsored retirement plans contribute on average at least $2,700 annually to their accounts. “This amount exceeds the $2,400 limit that Republicans reportedly have considered setting as a new pretax limit for retirement account contributions,” the letter states.