April 18, 2012
--- An economist and a tax expert detailed
how congressional budget scoring could derail retirement savings incentives.
House Ways and Means Committee prepared on Tuesday for an overhaul of the tax
code, the American Society of Pension Professionals and Actuaries (ASPPA) said
that the current system could take a bite out of the retirement savings
incentives American workers depend on.
In a report released by the ASPPA
called ”Retirement Savings and Tax Expenditure Estimates,” Judy Xanthopoulos, a
former economist of the JCT, and Mary M. Schmitt, a tax attorney, questioned the
method used the Congressional Joint Committee on Taxation (JCT) and the Treasury
Department’s Office of Tax Analysis (OTA).
In their report, Xanthopoulos and
Schmitt maintain that the current method ignores that money contributed to
401(k) plans (and investment returns) is taxed on the way out. The budget is
scored on a cash basis with a 10-year budget window. Because retirement
contributions typically are not all distributed within this time frame, the
scoring disproportionately reflects the tax cost of the contribution without
offsetting the tax revenue that is shared with the Treasury Department upon
distribution. The real present value cost of 401(k) contributions is less than
half the amount reported by JCT, the report said.