President Donald Trump tweeted his opposition Monday morning to changes to tax-deferred retirement accounts that were reportedly under consideration by House Republicans.
“There will be NO change to your 401(k),” Trump tweeted. “This has always been a great and popular middle class tax break that works, and it stays!”
House Republicans were considering a plan to slash the amount of income American workers can save in tax-deferred retirement accounts. Currently, workers can put up to $18,000 a year into 401(k) accounts without paying taxes on that money until they retire and withdraw money from their savings. Proposals under discussion on Capitol Hill would set the cap lower, perhaps as low as $2,400. The effect would be a huge tax hike on middle class workers.
The plan to lower the cap on 401(k)’s would not have had an effect on long-term government deficits. Instead, it would have raised tax revenue now but lowered it in the future, since the retirement savings would already have been taxed. But taxing the savings would have had an impact on household budgets and may have discouraged workers from saving, increasing their future dependence on government benefits.
The 401(k) tax deferral is very popular with middle class workers. It is also supported by the financial sector, which benefits when Americans buy mutual funds and securities with their retirement savings.
There had been rumors for several months that GOP lawmakers were plotting to raise taxes on retirement savings, although no formal proposal had emerged. Trump’s tweet appeared to indicate that the president had either not been briefed on such plans or had lately decided to oppose them.