New GOP Tax Plan Adds Savings Accounts, Expands 529s
The Tax Foundation applauded the framework’s inclusion of Universal Savings Accounts, but Greg Valliere sees a tough sell in the Senate.
House Ways and Means Committee Chairman Kevin Brady released Tuesday what he dubbed a “listening session framework” for his tax package, which makes permanent the individual income tax changes enacted in 2017 and includes a streamlined plan intended to help boost Americans’ retirement savings.
The framework, Brady said in a statement, “launches the listening sessions that will occur with lawmakers and constituents back home as Ways and Means Republicans work to make our new pro-growth tax code even stronger for our families and Main Street businesses.”
Brady’s framework lauds “family-friendly savings plans,” which include:
- Tax-free Universal Savings Accounts.
- Allowing use of 529 education accounts to pay for apprenticeship fees to learn a trade, cover the cost of home-schooling, and help pay off student debt.
- Allowing families to access their own retirement accounts penalty-free for expenses after a birth or adoption, and allowing families to replenish those accounts in the future.
The Tax Foundation applauded the framework’s inclusion of universal savings accounts.
As it stands now, “the tax treatment of retirement savings is riddled with restrictions, limitations and rules that differ across more than a dozen types of retirement accounts,” the right-leaning Tax Foundation said.
“Though the framework does not specify how lawmakers would reform the current structure of retirement savings, the creation of a universal savings account would be a significant improvement over today’s long-term savings options, especially for Americans who may not have access to retirement savings through their employer.”
Nicole Kaeding, Tax Foundation’s director of special projects, said the tax law “was a pro-growth tax reform that can help create jobs in the United States, raise wages and expand the economy. However, much of the [tax overhaul] is scheduled to expire over the next decade.” The new framework “helps provide individuals certainty in their tax code by proposing to make the individual income tax provisions permanent. We project that making the individual income tax provisions permanent would increase the size of the U.S. economy by 2.2% in the long run while reducing federal revenue by $165 billion annually.”
The plan would also improve the tax treatment of startup businesses.
“While it’s unclear what provisions the House may consider, lawmakers could make the Section 179 deduction more generous or create a standard deduction for startup business costs, among other options,” the Tax Foundation said.
Greg Valliere, chief global strategist for Horizon Investments, noted in his Capitol Notes briefing on Tuesday that Brady’s tax package “probably won’t go anywhere in this polarized Congress.”
That being said, the framework “contains an intriguing package of reforms in the Retirement Enhancement and Savings Act, which enjoys bipartisan support,” Valliere opined.
Brady “should get his bill out of the House Ways and Means Committee later this summer, and the full House could pass it in September,” he said, “but it faces a very high bar in the Senate.”