‘Tax Reform 2.0’ to Include Universal Savings Accounts
Building on the tax cuts enacted last year as part of the Tax Cuts and Jobs Act, Rep. Kevin Brady (R-TX), Chairman of the House Ways & Means Committee, released a "Tax Reform 2.0" framework July 24 that he plans to push this fall.
The two-page outline includes three main components: make the middle-class and small business tax cuts permanent, promote family savings, and spur new business innovation by allowing new businesses to write off more of their initial start-up costs.
As part of the promoting family savings component, Brady calls for:
- creating a new Universal Savings Account to offer a “fully flexible savings tool for families”;
- allowing families to access their retirement accounts penalty-free for new child expenses, whether by birth or adoption, with the ability to replenish those accounts in the future; and
- expanding Section 529 education accounts to also be available to pay for apprenticeship fees to learn a trade, cover the cost of home schooling and help pay off student debt.
Brady emphasized that his proposal seeks to assist working-age adults who say they do not expect to have enough savings to live comfortably in retirement and workers who do not have access to a retirement plan through their employer.
Brady intends for Republican members to use the framework for listening sessions with constituents back home over the August summer recess to help build consensus within the caucus, with the intent of taking action when the lawmakers return in September.
“With this framework, we are taking the first step to change the culture in Washington D.C. where tax reform only happens once a generation,” Brady said in releasing the outline. “We plan to work off this framework to build on the growing successes of the Tax Cuts and Jobs Act and ensure this energized economy continues moving forward.”
Brady has previously floated the idea of enacting universal savings accounts, including during last year’s debate over tax reform. In addition, universal savings accounts were included in the House Republicans’ 2016 tax reform framework and Rep. Dave Brat (R-VA) has introduced legislation. While the two-page framework didn’t include specifics, previous proposals introduced in recent years suggest that the accounts would serve as more of a general savings vehicle outside the employer-based system in which account holders could withdraw both contributions and earnings at any time, and for any reason, without tax penalties.
While proposals to make the TCJA cuts permanent would not be received favorably by Senate Democrats, there is hope that the savings component of Brady’s plan will include the bipartisan Retirement Enhancement and Savings Act. Many observers believe RESA could be enacted this year, as long as it doesn’t include any so-called “poison pills.”