President Donald Trump said there will not be changes to tax-deferred retirement savings plans under his proposed tax plan, shooting down reports that House Republicans were considering tweaking or capping one of the most popular breaks.
“There will be NO change to your 401(k),” Trump said Monday on Twitter. “This has always been a great and popular middle class tax break that works, and it stays!”
There will be NO change to your 401(k). This has always been a great and popular middle class tax break that works, and it stays!— Donald J. Trump (@realDonaldTrump) October 23, 2017
Trump’s declaration is the first time he has weighed in specifically on this portion of the tax overhaul debate. Republicans had been considering reducing the cap on the annual amount workers can set aside for their 401(k) retirement accounts, according to a New York Times report on Friday.
Workers can currently put as much as $18,000—or as much as $24,000 for workers over 50—in those accounts each year without paying taxes up front.
Capping that amount had been rumored for months as a way to help offset the individual and corporate tax cuts that the Trump administration hopes to enact by year end. But it would essentially pull future tax revenues forward by requiring Americans to pay taxes on retirement savings now instead of when they tap their nest eggs.
Wall Street has been girding for possible changes to the lucrative 401(k) industry, which in recent decades has funneled trillions of pretax dollars from workers’ paychecks into stocks, bonds and other financial assets.
Trump has made tax cuts the centerpiece of his legislative agenda and he issued a broad framework in September that, among other things, called for a reduction in the corporate income tax rate to 20 percent from the current 35 percent. He’s also repeatedly said that the middle class must benefit from the tax cuts.
At the same time, Trump has sought to highlight the rise in the stock market during his presidency, tweeting at least seven times in the last week about rising markets.
“Stock Market hits another all time high on Friday. 5.3 trillion dollars up since Election,” Trump tweeted on Saturday. “Fake News doesn’t spent much time on this!”
The Times reported Friday that Republicans were considering reducing the cap on tax-deferred 401(k) contributions to as low as $2,400. The Times said its report was based on interviews with lobbyists, tax consultants and congressional Democrats it didn’t name. That raises the possibility that those hostile to the idea are leaking details in an effort to raise an outcry before Republican lawmakers finish drafting the tax overhaul.
Republicans have so far struggled to find offsets for the steep tax cuts they have offered to both individual and corporate tax rates. After seeking to eliminate the tax deduction for state and local taxes, Republicans may be considering changes to ensure that middle-class Americans don’t end up with a tax increase.
The Senate adopted a 2018 budget resolution last week allowing for increasing the federal deficit by about $1.5 trillion—before considering any economic growth from the planned tax changes. The House may vote as soon as this week on the Senate budget resolution, which is a crucial step to passing a tax bill with only Republican votes.
—With assistance from Miles Weiss and Sahil Kapur