If you have been in a 401K like I have over the decades, you know this has been helpful in reducing tax on your income. If you do not know this, you do now. The GOP is making eyes on your 401k contributions with the intent of removing the upfront deduction which lowers your taxable income. The GOP would like to go to a Roth type of 401k. Either way, I would be ok.
The problem I have with this idea is it is being presented as a way to help holders of a 401K today. It is not. The entire exercise here is provide enough offsetting revenue to provide a major tax cut for those making >$500,000 annually which number ~1.5 million households of the 154 million tax paying households. Why would the GOP want to do this? A tax cut would have to be passed through Reconciliation as Dems would filibuster to block it and that would require a super-majority vote (which was not the intent of the founders[that is a different story]). Reconciliation also requires no deficits be created at 10 years otherwise the act sunsets the same as the 2001/2003 tax breaks did in 2014(?).
I do not know who Prof. James Choi is; but, I do know who Andrew Biggs is as he would make appearances here to challenge Bruce Webb and Dale Coberly on Social Security. Those discussions were a great way to learn about Social Security. Much of the points Bruce had made can be found at Social Security Defender or by doing a search at Angry Bear. Andrew Biggs felt the need to privatize Social Security.
Both Andrew and I assume the Professor are in favor of the transition and also funding tax cuts for those making > $500,000. The rest of this article can be found here; The GOP is looking for ways to pay for tax cuts. Your 401(k) may bear the cost.
“Some others say removing the up-front payroll deduction on 401(k)s would not have a big effect on participation. Many savers in the plans don’t understand the differences in the tax consequences between the 401(k) and Roth-based accounts, according to one study.
