There are times when no news is good news. That’s the case when it comes to retirement savings and the tax cut bill that House Republicans unveiled Thursday.
Earlier, it looked as if Republicans would propose to sharply reduce the tax-deductible amount that 49 million American workers can contribute to their 401(k) plans and similar “tax deferred” retirement accounts while sharply increasing the amounts they could put into nondeductible Roth accounts.
You pay tax on money that you take out of 401(k)s and such, and your heirs have to make taxable withdrawals if they inherit your plans. By contrast, withdrawals from Roths are tax-free, and you can bequeath them to your heirs, who can either withdraw money from them tax-free or hand them down to their heirs.
Reducing 401(k) deductions would have been a particularly heartless accounting gimmick, making retirement saving more expensive for tens of millions of working people by reducing their tax deductions to help cover the cost of eliminating the estate tax (no, it’s not a “death tax”) that 99.8 percent of estates escape and only about 5,400 a year pay.
Shrinking 401(k) deductions would also have helped cover the cost of the massive corporate tax cut that the Trump administration claims would be a huge help to average families but that in reality would disproportionately benefit families that own lots of stock, which by definition aren’t average families.
But at least for now, Republicans aren’t messing around with retirement plans — probably because they feared an uproar when average nongovernment employees, very few of which are covered by pension plans, figured out that they were being trashed by having retirement-savings tax deductions reduced.
Republicans were probably also getting heat from Wall Street, which would collect fewer fees if less money went into 401(k) plans than currently projected.
So there you have it. Retirement plans seem safe, at least for now. But I still think this tax cut bill is really bad, hurting the part of the country in which I live and boosting future burdens on my children and grandchildren by adding trillions of dollars to the national debt.
I also suspect that this bill would benefit President Trump considerably because of the generous changes it proposes to make for people like him who have “pass-through” income from entities in which they’re not actively managing.
But because we don’t have access to his tax returns, we can only guess.
The bottom line, as I noted a few days ago: If this legislation is well on its way to being passed by Thanksgiving, which seems to be the current plan, we won’t have to wait until Dec. 31 to find the turkey transaction of the year.
Allan Sloan is a columnist for The Washington Post.
