Congressional lawmakers appear to be far from enamored with a bipartisan Senate proposal to reduce the deficit, lift the debt ceiling and balance the budget, and a major retirement benefits group has come out against the idea as well, saying it will harm retirement plan participants.
Known as the “Gang of Six” proposal, after the six senators who crafted it — Tom Coburn (R-Okla.), Mike Crapo (R-Idaho), Saxby Chambliss (R-Ga.), Richard Durbin (D-Ill.), Kent Conrad (D-N.D.) and Mark Warner (D-Va.) — the plan would:
* Cap federal agency budgets (including defense) for the next four years.
* Slow the growth of Social Security benefits by curbing the program’s inflation adjustment.
* Streamline income tax rates to range from 8% to 29%.
* Trimming certain tax breaks, including deductions for mortgage interest, retirement savings, charitable giving, high-cost health plans and tax credits for families with children.
While lawmakers mostly are teeing off on the plan’s entitlement cuts and tax hikes, Brian H. Graff, executive director and CEO of The American Society of Pension Professionals & Actuaries, takes issue with the proposal’s cuts to tax deductions for retirement savers.
“We are very concerned that the proposal lumps retirement savings incentives, which are tax deferrals not exclusions, into the same pot as other incentives classified as tax expenditures,” Graff said in a statement.
“In reality, traditional retirement savings tax incentives don’t eliminate income tax on retirement savings, they defer payment of income tax until workers retire and benefits are paid out. The cost of the incentives is overstated because most of the deferred taxes will be paid after the short-term window used in Washington’s budget scoring. Failure to recognize this bad budget math could decimate savings rates where Americans save most—at work.”
What do you think? If Congress had to do whatever you told them on this issue, what would you say? Share your thoughts in the comments.
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