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Graff: ‘Blank Slate’ Approach to Tax Reform Would Put Retirement Savings at Risk

The two most influential members of the U.S. Senate when it comes to tax issues revealed yesterday that they intend to take a ‘“blank slate” approach to tax reform. In a “Dear Colleague“ letter, Sens. Max Baucus (D-MT), chairman of the Senate Finance Committee, and Orrin Hatch (R-UT), the committee’s ranking member, indicated that their plan for tax reform is to begin with “a tax code without all of the special provisions in the form of exclusions, deductions and credits and other preferences that some refer to as ‘tax expenditures,’” and asked for input from other members of the Senate as a first step in revamping the Code.

This approach could prove to be catastrophic for the nation's retirement system. According to Brian H. Graff, Executive Director/CEO of ASPPA and NAPA, “To begin the tax reform process, the tax deferral incentive for retirement savings is to be thrown out along with every other tax incentive in the Internal Revenue Code that represents permanent lost revenue.

“We appreciate the Senators’ acknowledgement that some tax incentives should be preserved — and we believe the incentive for retirement savings is clearly one of them,” Graff said in a statement. “However, we are disappointed that there is no recognition that the tax incentive for retirement savings is a deferral, not a true ‘tax expenditure.’ Tens of millions of American workers count on their employer-based retirement plans, and it is the tax incentive that powers these programs. In fact, the primary factor in determining whether or not a worker is saving for retirement is whether or not they have a retirement plan at work.”

Eliminating the deferral incentive “would destroy retirement security for working Americans,” Graff declared. “The benefits of this deferral incentive are very real, and the revenue that would be gained by eliminating it is not. Every dollar of retirement savings excluded from income today will be included as income when it is paid out in retirement. Treating the retirement savings income deferral like a permanent exclusion is terribly misleading, and could lead to bad policy decisions.”

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