The Moment of Truth: Will Tax Reform Include Rothification?
If last week’s volley
between President Trump and House Ways and Means Committee Chairman Kevin Brady (R-TX) over the potential Rothification of 401(k)s has you perplexed, rest assured, we should have some initial answers this week.
Following final House passage of the FY 2018 budget resolution last week, Chairman Brady announced that he would release his tax reform proposal on Wednesday, Nov. 1, and the Ways and Means Committee would begin marking up the proposal on Monday, Nov. 6.
Final approval of the budget resolution provides a “roadmap” for a 10-year net tax cut of up to $1.5 trillion by clearing the way for the tax cuts to be approved in both chambers by a simple majority and preventing the ability to filibuster the legislation in the Senate.
“By passing this budget today, House Republicans just provided the legislative runway for pro-growth tax reform. Our successful vote will allow us to move forward quickly on delivering the first overhaul of America’s tax code in more than three decades,” Brady said.
The resolution instructs the Ways and Means Committee to report the tax reform changes by no later than Nov. 13, although since the resolution is non-binding, this date could slip to later.
It’s worth noting that this legislation can and will undergo changes as it moves through the legislative process. In fact, that may very well happen from the time it’s released on Nov. 1 to the time it’s marked up on Nov. 6.
It’s also worth noting that the budget resolution passed the House by a narrow margin of 216 to 212, with no Democrats supporting the measure and 20 Republicans opposed to it, many of whom did so over the lack of reassurance that the state and local income tax deduction would not be touched.
For his part, Senate Finance Committee Chairman Orrin Hatch (R-UT) has not yet indicated when he would release his draft legislation or when the committee would begin consideration. He did, however, tell reporters last week that he is open to considering retirement plan changes, but did not elaborate on what they might entail.
Both House and Senate leaders have said that they want tax reform bills approved in their respective chambers by Thanksgiving. Democrats Support Trump on 401(k)s
While not a complete surprise, five Senate Democrats who sit on the Finance Committee said in a letter to the so-called “Big 6” that they approved of President Trump’s tweet protesting any changes to 401(k) limits. “We write to express our strong support for President Trump’s recent position that forthcoming legislation should not reduce or eliminate incentives for retirement savings,” the senators wrote. “We are alarmed by reports that you continue to consider ‘Rothification’ or severely limiting how much Americans can contribute to their retirement accounts,” they said, noting that, “Experts estimate Americans have saved between $6.8 trillion and $14 trillion less than what they would need to have a secure retirement.”