In New Round Of Tax Cuts, Retirement Changes Seen As Most Likely To Pass
Republicans are promising a comprehensive second round of tax cuts — but tax changes affecting retirement savings may be the only measures with enough political support to make it through Congress this year.
House Ways and Means Chairman Kevin Brady said Wednesday that he plans on releasing an outline of “Tax Reform 2.0” legislation next week to his committee members, which would include making the rate cuts for individuals permanent. Extending those cuts faces slim chances in the Senate, where it would need the support of at least nine Democrats to pass. The 2017 tax law passed without any Democratic votes.
Tweaks to retirement plans, however, are likely to garner bipartisan support, especially those related to small businesses. Brady told reporters he’s including a retirement-related bill in his draft that has the backing of Senators Orrin Hatch and Ron Wyden, the top Republican and Democrat on the Senate Finance Committee.
House Ways & Means Committee Chair Rep. Kevin Brady, R-Texas (right) and Speaker of the House Paul Ryan, R-Wis.
The bill, called the Retirement Enhancement and Savings Act, has “tremendous” support in the Senate, Wyden said. Still, he added that’s the only part of the tax cut plan Democrats would likely support, so its best chance of passing would be by carving it out from the broader legislation.
RESA is a bundle of small tax changes that seeks to increase options for workers to voluntarily save. The bill would make it easier for small businesses to join multiple employer plans, which would be a boon for gig workers. The bill also would give employers that sponsor traditional pension plans some relief from tax requirements that have led to the shuttering of those plans.
The 2017 tax law largely left retirement savings untouched despite talk about pushing savers to pay taxes up front and put their money in after-tax Roth retirement vehicles.
An extension of the tax cuts has been viewed as a House effort to score political points ahead of the November election. House Speaker Paul Ryan has pledged to vote on the legislation, while Senate Majority Leader Mitch McConnell has only said he’ll consider it.
“You have to recognize the reality of the political timeline that we’re under. We’re going into midterm elections,” Representative Tom Reed, a New York Republican, told reporters Wednesday. “We are being the rabble-rousers that we typically are in the House trying to lead on these issues and drag the Senate along.”
Republicans had hoped to make all the tax cuts in their 2017 law permanent, but budget constraints meant the reductions for individuals and pass-through businesses, companies where the owners pay the taxes directly, will expire in 2026. The long runway means that Republicans could have several more opportunities to extend the bill ahead of the sunset date.
Provided By: Accounting Today