New Report Details Increasing Costs of Retirement Savings Tax Incentives
The Joint Committee on Taxation (JCT), the congressional scorekeeper of tax legislation, on Aug. 5 issued its latest estimates
of the increasing costs of the tax incentives for retirement savings. The numbers are eye-popping.
JCT projects that:
• the tax exclusion for saving in DC plans will cost the Treasury $399 billion over the next five years;
• saving in DB plans will sap an additional $248.3 billion in revenue; and
• saving though self-employed pension plans will cost $52.1 billion.
The combined cost of the tax incentives for employer-provided retirement plans adds up to nearly $700 billion over the next five years, second in expense to only the tax exclusion for employer-provided health insurance (projected to cost $785.1 billion over the next five years).
When examined in a year-over-year basis, the JCT projects the rate of the increase in the cost of the tax expenditures for employer-provided retirement savings to accelerate. So by 2017, the annual cost of total savings in employer provided retirement plans ($171.5 billion) will be more than the tax exclusion for employer-provided health insurance ($163.6 billion). In that same year, the annual cost of the tax incentive for saving in just DC plans ($98.9 billion) will eclipse that of the tax deduction for interest payments on home mortgages ($87.8 billion).
These numbers amount to a giant target on the back of our industry, a target that will only grow larger. There are already numerous policy proposals floating around Washington D.C. to scale back the current incentives to save through the workplace. These proposals are being peddled by critics of the current system who argue that these incentives only benefit the rich, who don’t need the help to save.
These data are a reminder for us to remain vigilant in educating the decision makers that these incentives are a deferral of income, not a permanent loss to the Treasury that serves, along with Social Security, as the backbone of a secure retirement for tens of millions of Americans.
Andrew Remo is ASPPA’s Congressional Affairs Manager.