ASPPA CEO/Executive Director Brian Graff issued the following statement in response to President Obama’s attack on the tax incentives for retirement savings in his State of the Union Address.
“It is extremely unfortunate that while promoting the importance of retirement savings in the State of the Union, President Obama chose to attack the 401(k) plan, the primary retirement vehicle for tens of millions of middle-income working Americans. The President said the tax incentives for 401(k) plans primarily benefit those with higher incomes. In fact, 80 percent of 401(k) plan participants are middle class Americans making less than $100,000. The President said the tax incentives for retirement savings are “upside down” — meaning they mostly go to the wealthy. In reality, households making more than $200,000 only get 17 percent of the tax benefits from 401(k) plans, while middle income households enjoy the majority of such tax benefits. And the President once again called for cuts to the tax incentive, like last year’s proposal to cap overall retirement savings, which punishes successful savers who played by the rules and will certainly lead to the termination of small business retirement plans once business owners reach the cap.
What makes this anti-retirement tax incentive rhetoric even more maddening is the failure to recognize that the retirement savings tax incentive is not even a permanent write-off like most other tax incentives – it is a deferral. A dollar deferred today is a dollar taxed tomorrow. And the tax incentive for employer-based retirement plans comes with nondiscrimination rules and limits on contributions and compensation that ensure the benefits are broad-based and do not primarily benefit the wealthy. It is unconscionable that this incentive — which was so carefully constructed to ensure that benefits are broad-based — is so blithely maligned.
President Obama’s starter IRA accounts would do pitifully little to replace the significant benefits that millions of American workers get from their employer-sponsored plans if the tax incentives for retirement savings are reduced. It is disappointing that he chose to couple a proposal to help expand retirement savings opportunities for those without a plan at work with a threat to the tax incentives that power existing retirement savings plans for millions of middle class American families. ASPPA will continue to work to expand workplace retirement savings opportunities, and to fight the ignorance that leads to attacks on the tax incentives for retirement savings like the ones we heard last night.”