WASHINGTON – Republicans are still weighing adjustments to a popular retirement savings program, the chief of the House tax writing committee said Wednesday, contradicting President Donald Trump's statement this week that it would be unchanged in the forthcoming tax overhaul proposal.
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Ahead of next week's release of the House GOP tax overhaul bill, House Ways and Means Committee Chairman Kevin Brady (R., Texas) also said House Republicans were still discussing changes to the state and local tax deduction, and said he was hopeful that they would reach a compromise with lawmakers from high-tax states.
Mr. Brady's remarks at a breakfast hosted by the Christian Science Monitor indicated that many aspects of the tax code were still in play just days before Republicans plan to release their proposal for rewriting it. Mr. Brady said Tuesday that he planned to unveil the tax bill Nov. 1 if Republicans adopt a budget as planned on Thursday.
On Monday, Mr. Trump in a tweet promised to leave untouched the 401(k) retirement savings program, shooting down an idea that had been circulating of limiting pretax contributions to retirement accounts.
"There will be NO change to your 401(k)," the president said on Twitter.
Asked about Mr. Trump's tweet, Mr. Brady said, "We think in tax reform we can create incentives for Americans to save more and save sooner," Mr. Brady said. "We are exploring a number of ideas in those areas."
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Mr. Brady said House Republicans were working with Mr. Trump to ease his concerns.
"He shares the goal. We are continuing discussions with the president all focused on saving more, saving sooner," Mr. Brady said.
That could be a signal that Republicans might pinch pretax savings for high-income households and use the money to beef up an underused tax break known as the saver's credit, which acts like a government matching contribution to retirement accounts for low-and middle-income Americans.
Republicans are hoping to dramatically cut tax rates while adding no more than $1.5 trillion to the federal budget deficit over 10 years. To do that, they need to look for large tax breaks they can limit or repeal. One such proposal would cap 401(k) contributions at as little as $2,400 a year and push additional savings into so-called Roth-style IRA accounts where posttax dollars go in and money comes out tax-free after the taxpayer's retirement. Much of the revenue that change would generate would come from advancing tax collections from the future into the near term.
Currently, employees under age 50 can save up to $18,000 a year in a 401(k) before taxes, while those 50 or older can set aside up to $24,000. In a Roth 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.
Republicans are also hoping to generate significant revenue by eliminating or limiting the deductibility of state and local taxes, a proposal that has drawn sharp resistance from Republicans in high-tax states, including California, New York and New Jersey.
House leaders need at least some of those members' votes to get the bill through and they have been negotiating with New York and New Jersey lawmakers. So far, they haven't announced a deal, though they have been considering proposals to allow property tax deductions or to set an income limit for the tax break.
Mr. Brady said Wednesday that he was confident they would reach a compromise on the issue.
"I do expect to reach an agreement over [the state and local income tax deduction] with the high-tax lawmakers," Mr. Brady said, noting he had met with the group Tuesday night. "I expect before the bill is laid out next week that a solution will be announced. It's a work in progress."
The deduction allows individuals to subtract their home-state levies from their federal taxable income. In high-tax states such as New York, that can allow taxpayers to save big.
Mr. Brady was coy on many details of the tax legislation expected to be unveiled next week. He didn't guarantee that every American's rates would go down, but he said he could "guarantee that every American will be better off because of a simpler, fairer tax code."
The GOP tax framework, released last month, would establish just three individual tax rates, with an optional fourth higher rate on the highest-income households. Mr. Brady said Wednesday no decision had been made yet on that highest rate. He said the GOP tax bill would preserve the single head of household status. That is important to single parents, who get a larger standard deduction through that filing status than they would filing as individuals.
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(END) Dow Jones Newswires
October 25, 2017 10:29 ET (14:29 GMT)