In ASPPA’s statement, Graff said the inclusion of retirement savings tax deferrals in the same category as permanent deductions and exclusions may put American workers retirement security in jeopardy and would not help in reducing the long-term deficit because the proposal relies on inflated numbers.
“The Gang of Six proposal would raise $1 trillion in revenue by reducing tax incentives, including those for retirement savings. 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,” the statement says.
“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.
“We urge Congress to tread carefully. Raising short-term revenues by reducing the tax deferral incentives created to provide retirement security for millions of American workers and retirees is not in the long-term interest of American workers or their children.”The “Gang of Six” includes Senators Tom Coburn (R-Oklahoma), Mike Crapo (R-Idaho), Dick Durbin, (D-Illinois), Kent Conrad (D-North Dakota), Saxby Chambliss (R-Georgia), and Mark Warner (D-Virginia). Text of their proposal is at http://www.asppa.org/Document-Vault/pdfs/GAC/bipart.aspx.