Rothification Residual Remains in Tax Reform Talks

By ASPPA Net Staff • August 29, 2017 • 0 Comments
Published reports say that President Trump’s top aides and congressional leaders have made “significant strides” in shaping a tax overhaul — and yes, Rothification remains on the table.

Politico, citing five sources familiar with the behind-the-scenes talks, reports there is “broad consensus” on some of the best ways to pay for cutting both the individual and corporate tax rates. Options cited include capping the mortgage interest deduction for homeowners, scrapping people’s ability to deduct state and local taxes and eliminating businesses’ ability to deduct interest, while also phasing in so-called “full expensing” for small businesses — allowing them to immediately deduct the cost of investments like new equipment or facilities.

Not in that short list, but a notion “quietly being discussed” is altering the current pre-tax treatment of 401(k) contributions. While Politico notes that this idea “would raise billions of dollars in the short-term,” the report also acknowledges that this policy idea is “widely disliked by budget hawks, who consider it a gimmick; the financial services industry that handles retirement savings; and nonprofits that try to encourage Americans to save.”

And we haven’t even gotten to the American people.

Whether this reported concurrence in principle can translate into an actual tax plan that can pass both the House and Senate remains an open question.

One bright note: Gary Cohn, President Trump’s chief economic advisor, told the Financial Times last week that the tax reform plan will protect the personal charitable, mortgage and retirement savings deductions but take away other deductions for individuals. He noted the White House also wants to eliminate “death” and estate taxes. For corporations, the plan will lower the overall tax rate in exchange for eliminating other deductions, he added.