US President Donald J, Trump declined a possible method to augment revenue for financing tax slashes in a politically compulsive legislation for GOP. The President said on October 23 that nothing will touch the 401(k) savings program. The latter is a retirement savings scheme. This does not mean there will no changes to the structure of the 401(k). Republicans are all out for a quick tax legislation being written down. When queried about this issue, Representative Kevin Brady of Ways and Means Committee said that it will be a component of tax reform bill. Upon further questioning, he said that Trump's stance on the issue changes nothing on the ground.
Trump, in his characteristic social media tweet, said that tax incentives will not be changed for 401(k) retirement programs. The Senate's second-most powerful GOP, John Cornyn, the Senate Majority Whip elected from Texas, said he is sympathetic to Trump's view as the Republican Party does not want Americans to be discouraged from saving their money. About 55 million American workers hold approximately five trillion in 401(k) accounts. They are prime retirement security schemes for middle-class Americans.
The GOP is desperately searching for new revenue spigots to pay for the expected tax slashes. The latter is anticipated to be more than one trillion dollars. GOP House members belonging to high-tax states have fiercely opposed the proposal to eliminate the popular federal deduction for local and state taxes. Republicans are afraid that enacting this tax legislation may result in losing their majority after the 2018 elections.
Plans and futures
President Trump and the GOP leaders have crafted a plan which asks considerable tax cuts for both individuals and corporations. This is the doubling of standard deduction utilized by a majority of Americans. The plan will shrink tax bracket numbers from the present seven to three or even four. The inheritance tax imposed on multimillion-dollar estates will be repealed. There will be a rise in child tax credit. A simplification of the tax system will be made. The majority of Americans could then easily file income taxes.
Earnings of employees from 401(k)s and other defined contribution plans for retirement are not taxed until the start of retirement. Tax-preferred status is given to pay-ins by both employees and employers. The federal government forwent $82.7 billion in terms of lost revenues due to these policies during the recent budget year which ended on September 30, 2016. For the GOP tax cutters, these make viable targets.