Whether it's shady politics or just bad math, proposals to curb retirement plan tax incentives are not only detrimental for low-income savers, they're based on inflated calculations, experts said this week.
Lawmakers are eying tax-deferred retirement savings as a way to tackle the deficit. They've labeled 401(k) incentives as regressive tax expenditures that need to be reduced (which sounds better than proposing tax increases). By stifling the tax breaks on these plans, Congressional leaders hope to recoup some of the $600 billion in lost tax revenue over the next five years.
As tax-deferred retirement savings are one of three top "tax expenditures" in the U.S., it's no wonder the feds are targeting it. But economists at ASPPA say the forecasted savings from scaling back 401(k) tax incentives is not just a little exaggerated, it's inflated by almost 75 percent due to faulty analysis.
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