Though tax-deferred retirement savings are one of the top three U.S. tax expenditures, ASPPA researchers found the lost tax revenue the government hopes to recoup by curbing tax breaks is based on inflated calculations. Earlier estimates from ASPPA show the real cost of retirement savings incentives to be 55 percent to 75 percent lower than claimed by government budget analysts.

When evaluating the cost of the tax deferrals associated with defined-contribution plans such as 401(k) and Keogh plans, the Congressional Joint Committee on Taxation (JCT) and the Treasury Department’s Office of Tax Analysis (OTA) both use current cash-flow analysis, ASPPA argued in early June. Since workers withdraw money from these plans only in retirement, the taxes paid show up outside the 10-year timeframe used in cash-flow analysis, and therefore are “scored” as lost revenue, rather than deferred revenue. These tax deferrals differ from tax credits or deductions, such as those for medical expenses or mortgage interest, since the taxes deferred ultimately are paid.

"Failure to recognize this bad budget math could decimate savings rates where Americans save most—at work," Graff said. "We urge Congress to tread carefully. Raising short-term revenues by reducing the tax deferral incentives created to provide retirement security for millions of American workers and retirees is not in the long-term interest of American workers or their children.”