President Trump took a tax reform bargaining chip off the table Monday by declaring he would not impose new limits on the amount Americans can contribute to 401(k) retirement savings plans before taxes.
"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!"
Some congressional Republicans, concerned about how Trump's proposed tax cuts might increase budget deficits, have looked at generating revenue by limiting the amount of pre-tax money that people could invest in 401(k) accounts.
Right now, Americans can sock up to $18,000 a year in their 401(k) accounts without paying taxes on those contributions – and, workers over the age of 50 can set aside as much as $24,000. They only pay taxes when they begin to withdraw these benefits at retirement. The maximum tax-free contribution is set to rise another $500 in 2018.
Yet The New York Times reported last week that lawmakers were discussing a pre-tax cap as low as $2,400 – an idea that has drawn opposition in Congress, the financial management industry, and, apparently, in the White House.Trump's decision to rule out changes to 401(k) programs comes after a weekend interview in which he said he wants Congress to produce a tax cut plan he can sign by the end of the year.
"I want to get it by the end of the year, but I’d be very disappointed if it took that long," Trump told Fox Business Network.
Trump and aides have repeatedly expressed confidence they have the votes for a major overhaul of the tax system, despite a few warnings from lawmakers about budget deficits and other aspects of the plan.
"Our economy cannot take off like it should unless we transform our outdated, complex and burdensome tax code, and that is exactly what we are proposing to do," Trump said in an op-ed for USA TODAY.
In Congress, some Republicans have expressed concern that massive tax cuts would explode budget deficits, while Democrats said they will fight any bill that benefits the wealthy at the expense of the middle class.