Trump's tax cuts 2.0 could include this retirement savings perk
The president is aiming to introduce the package by September
The Trump administration is aiming to introduce another middle-class tax cut before the November election, and the package could include a measure that would give larger tax breaks to certain retirement savings.
The administration is considering including a proposal known as USA accounts – which would combine and simplify all existing savings accounts that give tax breaks (401(k)s, IRAs), a senior administration official told FOX Business on Friday. There may be limits, however, as to how large the tax break could extend through these vehicles.
The idea is popular among lawmakers on Capitol Hill, according to the same official, who cautions that no final decisions have been made.
The idea of a Universal Savings Account has been floated by Republicans before, under the guise that contributions would be taxed but earnings would grow tax-free and would be easier to withdraw than a traditional retirement account.
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The administration is also considering including a proposal to treat a portion of household income as tax-free if it is invested outside of a traditional 401(k) account, CNBC reported Friday.
A spokesperson for the Treasury Department did not immediately return FOX Business’ request for comment regarding that proposal.
President Trump has said he is aiming to pass another “very big” middle-class tax cut, targeting even faster U.S. economic growth.
As previously reported by FOX Business, National Economic Council Director Larry Kudlow said Trump has urged him to get the details out by September – two months prior to the 2020 election.
Meetings between the administration and House Ways and Means Committee Ranking Member Rep. Kevin Brady are ongoing, Kudlow has confirmed.
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So what’s likely to be included? According to Kudlow, they are looking at potentially adjusting the tax brackets again.
In November, when asked about speculation that the White House was contemplating a 15 percent tax rate for the middle class, Kudlow told CNBC during an interview that it sounded like “a pretty good idea.”
There are currently seven tax brackets, with rates ranging from 10 percent to 37 percent. While some middle-class Americans may already be paying a 12 percent rate, others are paying 22 percent or 24 percent – which means a potential cut to a 15 percent rate would save them a lot of money.
Additionally, the administration is seeking to make some measures permanent from the Tax Cuts and Jobs Act that are set to sunset in 2025 – on both the individual and corporate sides.
For corporations in particular, corporate expensing is likely to make that list.
A senior administration official told FOX Business in September that lowered personal rates, the doubled standard deduction and the $10,000 cap on state and local tax deductions were also being considered among the items the administration hopes to make permanent.
The Tax Cuts and Jobs Act reduced the corporate tax rate to 21 percent, from 35 percent. That rate cut is already permanent.
A payroll tax cut, however, is not high on the administration’s priority list. In fact, when FOX Business' Liz Claman mentioned it to Kudlow in January, he immediately said “no.”
The tax cut specifics are expected to be laid out in the run-up to the 2020 election, as an allusion to Trump’s future economic agenda.
The proposal will likely be laid out in opposition to many of the 2020 Democrats’ platforms, which call for tax increases and expansions as they seek to fund a variety of social programs.
The Tax Cuts and Jobs Act was signed into law by Trump in 2017. It was one of the most significant overhauls of the U.S. tax code in decades.
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FOX Business’ Blake Burman contributed to this report.