The Corner

Economy & Business

Republicans Against the 401(k)

Once again, the GOP is behaving as if it believes that it will be running Washington in perpetuity. Scrapping tax ‘breaks’ that have hitherto been thought to be politically untouchable, such as the mortgage interest tax deduction, a sensible deduction that is not only logical—if interest income is taxable (and it is), then interest expense should be deductible—but may even do some good, in exchange for what could quite easily be a short-term cut in tax rates makes little sense. Give the Democrats a chance—and sooner or later they will get the chance—and higher tax rates will return. The tax breaks will not.

And so (via the WSJ) we come to this idiocy (my emphasis added):

[L]awmakers are looking at proposals that would allow 401(k) participants to contribute significantly less than what is currently allowed in a traditional tax-deferred 401(k). An often mentioned amount is $2,400 a year. It isn’t clear whether that would only apply to 401(k)s or IRAs or both.

Currently, employees under age 50 can save up to $18,000 a year in a 401(k), while those 50 or older can set aside up to $24,000. In an IRA, the annual contribution limits are capped at $5,500 and $6,500 for the same age groupings. The 401(k) limits are scheduled to rise to $18,500 and $24,500 in 2018.

And there’s something else, which Rob Portman, at least, appears to understand:

Sen. Rob Portman (R., Ohio) said he was “skeptical” about the idea of lower pretax deferrals for retirement savings. Mr. Portman said Thursday that he didn’t want to make the decision just for revenue reasons.“I’m deeply concerned about it,” he said. “I don’t think you want to disincentivize retirement savings in any way right now.

No, you do not, especially as those most likely to be disincentivized are those at lower income levels.

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