Washington
House Ways and Means Committee Chairman Kevin Brady, R-Texas, on Wednesday suggested that his upcoming tax bill could force changes to 401(k) plans and other retirement accounts, a move that would buck a promise from Trump that those accounts would be left alone.
“We think in tax reform we can create incentives for people to save more and save sooner,” Brady said at a breakfast hosted by the Christian Science Monitor.
Brady, who’s expected to introduce a tax bill next week, said that many people who have tax-incentivized retirement accounts contribute $200 per month or less, a level he thought was too low.
“We think we can do better,” Brady said, who said he was working closely with Trump on the issue. “We are continuing discussions with the president, all focused on saving more and saving sooner.”
Trump on Monday pledged the Republican tax effort would not change the rules for the 401(k) accounts.
“There will be NO change to your 401(k). This has always been a great and popular middle class tax break that works, and it stays!” Trump wrote on Twitter.
Trump reiterated his stance on Wednesday, after Brady’s comments, praising Brady’s work on taxes but saying it was unwise to consider changes to the retirement accounts.
Brady wouldn’t go into any details about how he planned to change incentives to encourage more savings. Rather, he suggested that the current construct of 401(k) accounts and Individual Retirement Accounts was not working well.
These types of accounts allow people to contribute up to $18,000 a year pretax as a way to incentivize saving for retirement. Lowering the tax-free threshold could raise more revenue, but it could also rankle voters. In 2015, more than 50 million Americans had active 401(k) accounts.
On Wednesday, Senate Finance Committee Chairman Orrin Hatch, R-Utah, said he was open to possible changes on the tax code’s treatment of retirement accounts, despite Trump’s pledge.
“I’m open to look at anything,” Hatch said on Wednesday morning. “I don’t have any problem looking at everything.”
Hatch also said he doesn’t feel pressure to change the Senate’s eventual tax bill because of pressure from the White House.
Trump “has his point of view, and he may prove to be right in the end,” he said. “We’ll just have to see. But I’m open-minded about it.”
Hatch said he hasn’t spoken with Trump about the 401(k) issue since the president sent his directive about it Monday morning.
Hatch is the top tax writer in the Senate, and he and Brady have outsized influence over how the tax legislation comes together.
Rep. David Schweikert, R-Ariz., suggested Congress, rather than Trump, should lead the effort to draft tax legislation.
“The problem is the issue’s a lot more complicated,” said “We’re the ones writing the bill. At some point he gets to agree or veto. Ultimately we have to make the math work.”
Congressional Republicans have their own divides on taxes. On Wednesday, House Republican leaders scrambled to keep the tax effort on schedule, working to win over members who have balked at a proposal to ditch an income tax deduction that particularly benefits their home states.
The House is scheduled to cast a critical vote today on a budget measure that would set out key parameters for the tax bill and pave the way for Republicans to pass it without Democratic cooperation.
Some House Republicans on Wednesday threatened to vote against the budget because of concerns that the eventual tax bill would eliminate or limit the existing deduction for state and local taxes, also known as “SALT.”
Lawmakers from states with high state and local taxes are balking at the proposed change, arguing it would hike tax bills for their middle-class constituents. Four Republicans, all from either New York and New Jersey, told The Washington Post they intended to vote against the bill unless a deal on SALT is reached.
“Unless I get more concrete information on a reasonable agreement, then I will be a no on Thursday,” said Rep. Lee Zeldin, R-N.Y.
Brady on Wednesday evening said GOP leaders will “take our time with those members, because we want to see people keep more of their earnings, regardless of where they live, including in high-tax states.” He said he is confident Republicans have the support necessary to pass their spending blueprint, “because this budget vote is about allowing pro-growth tax reform to occur. It isn’t the tax bill.”
House GOP leaders are planning to huddle with the blue-state Republicans on the issue following the budget vote today, a leadership source said.