By Siobhan Hughes and Anne Tergesen, Wall Street Journal–
House Republicans have introduced legislation to lock in cuts to individual tax rates beyond 2025, a proposal that will have trouble advancing in the Senate but which sends a signal about GOP priorities ahead of competitive midterm elections.
The sweeping, $1.5 trillion tax cut enacted into law last year permanently lowered the corporate tax rate to 21% from 35%. But reductions in individual tax rates were scheduled to expire after eight years so the GOP could meet a restriction imposed as a condition of the fast-track reconciliation procedures used to pass the new tax law. The restriction mandated that the tax law couldn’t increase budget deficits beyond 2027.
“This legislation is our commitment to the American worker to ensure our tax code remains the most competitive in the world,” said House Ways and Means Committee Chairman Kevin Brady (R., Texas), the principal architect of the 2017 tax cuts.
The merits and disadvantages of the 2017 tax law are being hotly debated in many races for House and Senate, with Republicans seeing the tax cuts as providing a growth spurt that has boosted employment and wages. Democrats argue the tax cuts disproportionately benefit the wealthy while also adding to the federal budget deficit.
“With this second attempt at major tax legislation, congressional Republicans have doubled down on their initial tax scam and are yet again putting the wealthiest, most privileged Americans ahead of average, hardworking families,” Rep. Richard Neal (D., Mass.), the top Democrat on the tax-writing committee, said.
Among the retirement-related provisions in the bill is one that would allow small employers to band together to offer 401(k)-type plans. By joining a so-called multiple-employer plan, or MEP, small companies can spread plan administrative costs over more participants, lowering fees.
The arrangement is now available, but only to employers with an affiliation or connection, such as members of the same industry trade association. The bill would eliminate that restriction.
The bill would also allow 401(k) participants who have an annuity in a 401(k)-type plan to transfer the contract tax-free to an individual retirement account.
It would also eliminate the required minimum distributions individuals age 70½ or older must take from their IRAs and 401(k)-type accounts—although the provision would only apply to those with a cumulative balance of up to $50,000 in their retirement accounts.
Mark Iwry, who oversaw retirement policy in the U.S. Treasury Department during the Clinton and Obama administrations, said the Obama administration proposed a similar measure in 2013, an indication of possible bipartisan support.
If you are 70½ or older, you can’t currently make deductible contributions to a traditional IRA. The bill would remove the age cap and allow people above 70½ or older to deposit up to $6,500 a year in either a traditional IRA or a Roth IRA.
The bill would also allow individuals to contribute up to $2,500 a year of after-tax money into a new type of universal savings account, where the money would grow tax-free and could be used for nonretirement purposes.
The bill would permit parents to withdraw up to $7,500 from a retirement plan penalty-free within a year of the birth or adoption of a child. And it would allow the use of money in a 529 college savings account to fund expenses, including for books and supplies, associated with an apprenticeship program or home schooling. Parents also would be permitted to use up to $10,000 from a 529 account to help a child with his or her student loan payments.
Write to Siobhan Hughes at siobhan.hughes@wsj.com and Anne Tergesen at anne.tergesen@wsj.com
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