US President Donald Trump and US Republicans were on Wednesday at odds over changing the 401(k) retirement program to help finance tax cuts, as the president insisted that the policy popular with the middle class will remain untouched, but lawmakers were open to revisions.
US House of Representatives Committee on Ways and Means Chairman Kevin Brady, who is also chairman of the US House of Representatives tax-writing panel, would not rule out changes to the program used by 55 million US workers, who hold about US$5 trillion in their 401(k) accounts, a system that has become a touchstone of retirement security for the middle class.
The Republican Party is straining to find new revenue sources to pay for anticipated tax cuts exceeding US$1 trillion. The deduction is a widely popular break used by some 44 million Americans, especially in high-tax, Democratic-leaning states like New York, New Jersey, Illinois and California.
Earlier this week, Trump promised the program would be left alone and appeared to bolster that pledge on Wednesday, saying he moved swiftly to end speculation that the tax-deferred program could be changed, because it is vital for working Americans.
However, he went on to muddy the waters when asked about Brady’s statements hours earlier.
“Maybe it is, and maybe we’ll use that as negotiating,” Trump said during an impromptu news conference as he left the White House for a trip to Texas. “But trust me... there are certain elements of deals you don’t want to negotiate with... and Kevin knows it, and I think Kevin Brady is fantastic, but he knows how important 401(k)s are.”
Brady earlier on Wednesday said he was discussing the issue with Trump, who had shot down the possibility of changes on Monday.
A senior Republican US senator signaled he would vote for a tax bill even if it crimped 401(k) tax benefits.
The nearly US$6 trillion
Republican plan calls for steep tax cuts for corporations and promises reductions for middle-income taxpayers, a doubling of the standard deduction used by most Americans, shrinking the number of tax brackets from seven to three or four, and the repeal of inheritance taxes on multimillion-dollar estates. The child tax credit would be increased and the tax system would be simplified.
Crucial details of the plan have yet to be worked out.
An Associated Press-NORC poll released on Wednesday found most Americans saying Trump’s tax plan would benefit the wealthy and corporations, and less than half believing his message that “massive tax cuts” would help middle-class workers.
With Republican leaders battling to show themselves as true standard bearers for the middle class, eyeing next year’s midterm elections that are deemed essential to retaining their majority, the 401(k) issue has become a flashpoint.
Republican lawmakers have been considering changes to the 401(k) structure, such as limiting the amount of tax-deferred contributions employees can make, as a way to help finance tax cuts.
“We think, in tax reform, we can create incentives for Americans to save more and save sooner, which can help them,” Brady told reporters at a Christian Science Monitor breakfast. “So we are exploring a number of ideas in those areas. ... We are continuing discussions with the president, all focused on saving more, saving sooner.”
Brady’s counterpart in the Senate, Republican Senator Orrin Hatch, also indicated that possible changes to 401(k)s remain on the table.
“I’m open to looking at anything,” he said.
Another senior member of the Senate Committee on Finance, US Senator Chuck Grassley, went further.
“We’ve got to have tax reform, and I can’t fall on the sword for one issue,” Grassley told Iowa reporters on a call.
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