capitol building in DC The FamilySavings Act would add $20.97 billion to the total debt over the10-year budget window, from 2019 to 2028, but that's a drop in thebucket compared to the cost of the Protecting Family and SmallBusiness Tax Cuts Act, which would make permanent the tax cuts madein last year's Tax Cuts and Jobs Act. (Photo: Fotolia)

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The retirement and savings incentives that make upthe Family Savings Act, one of three bills the House Ways and MeansCommittee will mark up on Thursday, will add to the federaldeficit, according to numbers released by the Joint Committee onTaxation.

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All told, the bill would add $20.97 billion to the total debtover the 10-year budget window, from 2019 to 2028.

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That's a drop in the bucket compared to the cost of theProtecting Family and Small Business Tax Cuts Act, which would makepermanent the tax cuts to individuals and small businesses made inlast year's Tax Cuts and Jobs Act. Those cuts willotherwise sunset in 2025.

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Making the cuts permanent will add another $630.9 billion to thecountry's debt over the 10-year budget window.

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That number is already getting blowback from fiscal hawksoutside of Congress, with more surely to follow.

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“This is a plan built on quicksand – sinking in the very debtthat finances it. Not only will it add hundreds of billions to thedeficit, but it may actually slow long-term growth, especially ifrecent spending increases are also made permanent,” said MayaMacGuineas, president of the Committee for a Responsible FederalBudget, in a press statement.

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JCT's score of the cost of making individual and small businesstax cuts permanent understates the true cost of the proposal, saysCRFB, a non-partisan advocate for spending reform that's board ofdirectors includes Democrat and Republican luminaries from previousCongresses and Administrations.

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CRFB estimates the true cost of Tax Reform 2.0 will be $5 trillion over 20years, accounting for interest payments on newly issued governmentdebt needed to finance the tax cuts.

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Supporters of Tax Reform 2.0 will counter that JCT's score failsto account for economic growth.

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But with the retirement plan sponsorship and savings incentivesbuilt into the Family Savings Act, JCT's numbers seem to indicatethe policies would incentivize greater participation in retirementplans and greater savings rates.

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The biggest cost of the bill comes from Universal Savings Accounts, relaxed RMD rules, and Open Multiple Employer Plans, respectively.

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Here is a breakdown of how JCT says those policies would impactthe country's debt.

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1. Universal Savings Accounts would add $8.6 billion todebt

USAs allow cash contributions up to $2,500annually to investment savings accounts. Joint files may be able tocontribute more.

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The JCT does not explain why after-tax contributions would addto the deficit. Distributions from USAs would not be included asincome—and would not be subject to capital gains taxes. Inquiriesto economists were not returned before press time.

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2. Relaxed RMDs would add $6.2 billion to debt

Under existing law, minimum distributions from traditional IRA and 401(k)accounts are required once account holders reach age 70 ½ (aka RMDs). Under the Family Savings Act, that requirement would bedropped for accounts with less than $50,000 in assets.

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In a separate provision, the bill repeals the existingprohibition on contributions to traditional IRAs after age 70 ½ .JCT expects that will add $80 million to the debt over 10 years.Together, the provisions are aimed at addressing increasingmortality rates increasing retirement ages.

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3. Open MEPs would add $3.7 billion to the debt

This may be good news, as it indicates that removing existingbarriers to pooling multiple employers under one 401(k) couldaccelerate the adoption of more MEPs, bringing access to workplaceretirement plans to more workers.

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JCT sees the debt from the proposal increasing each year overthe 10-year window, from $17 million in 2019 to $727 million by2028.

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Wider plan adoption means more pre-tax dollars invested inretirement savings accounts, which would explain the near-term lostrevenue to federal coffers.

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But here its limited 10-year outlook likely skews the JCT'snumbers. What revenue is lost in the short term will ultimately begained in the long term, as new retirement savers make withdrawalsin retirement that are taxed as ordinary income.

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