Even though retirement plans seem to be (mostly) off the table (for the present), we don’t yet know all that tax reform might bring – and NAPA Net readers don’t appear to be excited about the prospects.
A clear plurality – 32% – said that based on what they knew about the tax reform proposals, they “hated” the current proposals, and another 20% didn’t really like the proposals. Yet another 21% said that while they liked the concept of tax reform, “these proposals won’t cut it.”
That means that about 5% liked the House version (at least more than the Senate), a similar number liked the Senate version (at least more than the House), and a similar number liked both (perhaps equally?). Just over 7% said they weren’t sure about the current proposals, and the rest split between “too soon to tell” and “other.”
Several opined that they would prefer a flat tax, while one reader noted “From a retirement industry perspective, we should thank our lucky stars, although the change for pass-through entities will certainly impact the smaller plan market. Larger employers will continue their plans whether or not owners participate.”
While it may not have played a role in their evaluation, more than 4 out of 10 (41%) expected to fare worse (personally) under the new proposals, though 23% thought they would be better off. “Probably worse off. I do my own taxes so I know where the numbers come from, and based on my preliminary calculations I’ll pay at least a few thousand dollars more so the wealthy can enjoy their tax breaks. For reference, total household income is in the low six figures (no, I do not consider myself wealthy nor even ‘upper’ middle class) and currently I itemize,” said one respondent.
“I will probably be better off; however, my adult children will probably suffer thanks to a ballooning deficit and the likelihood that they will experience reduced Social Security and Medicare benefits,” explained another.
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About 16% were in “who the heck knows” camp, and the rest hadn’t taken the time to think about it. “Probably worse off,” noted one reader. “Waiting to see what comes out of conference before taking the time to confirm this. Among many unknowns is where the tax brackets will land and whether the AMT will be preserved.” Another commented: “I might benefit by a few hundred dollars but my evaluation of whether it is good legislation is not based on who wins and who loses but rather whether it achieves the goal of simplifying the code, broadening the base, and creating the right incentives to work, save, invest. For the most part this legislation is on the right track. The problem with expanding deficits should have been solved on the spending side and it is my opinion that a tax bill doesn't need to be revenue neutral. My largest concern is that Congress will not reduce spending in the future.”
Love it – or not – a full two-thirds expect tax reform to happen this year, and though 18% weren’t sure, only 14% said they didn’t see it happening. One reader noted, “If only I had a crystal ball.”
As for the impact on business, if tax reform does happen, opinions were all over the place. About 27% thought it would be good for business, and another 29% were of the opinion that it would be good for business in the short run, not so good in the long term. A nearly identical 28% said it depends on what you mean by business – and just 7% thought it would be bad for business. “Depends on how it is applied... or gamed,” noted one reader. “Good for business owners, bad for everyday Americans,” observed another, a sentiment echoed by the reader who opined, “What may be ‘good for business’ will not necessarily be good for our economy, workers’ wages, or our country’s debt!” Still another noted, “Good for pass-through income business owners. After that, well, trickle-down economics is a phrase, but not really a thing that happens.”
As for reader comments? Well there were plenty – here’s a sample:
- “The AMT for individuals should be repealed... today.”
- “Republicans are being completely irresponsible advancing tax cuts for the wealthy and adding $1 TRILLION+(!) to the deficit! I used to be a staunch Republican, but they have lost their minds and their moral compass, and will hopefully lose their majorities in 2018.”
- “Hopefully, it will also be good for retirement plan savings and individuals, too.”
- "BIG" businesses will fare totally different than small businesses.”
- “If they want to cut taxes they need to find approximately equivalent spending cuts.”
- “This is just blowing up the deficit to give the wealthiest the biggest break. Very concerned about negative impact on middle class, especially losing state tax deductions and getting double taxed.”
- “Tax reform looks great! Now we just need to get government spending under control (please, no one hold your breath).”
- “It ultimately didn't matter what was in the bill; the Republicans had to pass something, anything, to prove to their base that they could get something accomplished, even though the large majority of their base is going to be totally screwed by it.”
- “The goal should be to boost the middle class and nothing I’ve seen seems to do just that. They are also including things that should be kept separate, like the repeal of the individual mandate for example.”
- “S-corp owners will have a strong incentive to reduce their W-2 income. This makes retirement plans hard to sell.”
- “Stop calling it tax ‘reform.’ This is nothing more than a tax cut for those who don’t need it.”
- “If you are a big dollar contributor, an oil, gas or real estate company, or wealthy, the tax plan will work in your favor. If you are a low, middle or upper middle class, this will not be in your best interest.”
- “If the pass-through business owners no longer have incentive to sponsor retirement plans, then not only will I have to pay more taxes as a result of the ‘tax break’ but also I will no longer have a job and income to pay them with. Oh, wait, maybe that's part of the plan – you know, if I don’t pay taxes at all I guess that's a ‘break.’ And how is it a service to the economy when all of those American workers no longer have an easy way to save for retirement, often with employer contributions, and instead have to live on non-existent Social Security at some point? I think a lot more consideration and debate would have been quite valuable. I don’t see the benefit of passing something that hasn’t been thought through just to say you passed something.”
- “Good in general. Bad for high wage earners living in CA. Very bad for retirement plans.”
- “I see the need for reform, but the little guys and gals like me are the ones who end up taking the brunt of the hit, not the people who are wealthy.”
Thanks to everyone who participated in our weekly NAPA Net reader poll!