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| Photo Credit: AP. |
A Senate retirement bill currently under deliberation in the Senate provides tax break to wealthy Americans by bringing forward the payment schedule to remain revenue-central within the 10-year budget window, the Hill reports. The procedure if passed may add to an already spiraling national deficit unless a future Congress raises taxes.
The Senate’s
Enhancing American Retirement Now (EARN) Act raises the age at which taxpayers
must start making withdrawals from 72 to 75, allowing them three extra years of
tax-free growth, according to The Hill.
The proposal
would most likely benefit the wealthy that often use their retirement accounts
as tax-sheltered investment vehicles rather than as savings to cover the cost
of living in old age. Most Americans start living off their retirement accounts
well before the age of 75, according to The Hill.
The bill
allows Americans to deposit additional $10,000 a year into their retirement
accounts beginning between the ages of 60 and 63. The feat may only be achieved
by rich Americans as most Americans cannot afford that.
The plan
allows retirement plan participants to opt for Roth IRAs instead of traditional
ones.
Taxes are
taken out of Roth accounts when you put money into them as opposed to when you
take money out, according to The Hill.
“These
pay-fors are the same as the ones in the retirement bill that passed the House.
They’re a gimmick,” Steven M. Rosenthal, a senior fellow at the Tax Policy
Center, a left-leaning Washington think tank, said in an interview, according
to The Hill. “I’ve seen every gimmick in the book, and Roth IRAs are the
worst.”
“It’s an egregious
use of budget scorekeeping rules,” Rosenthal added. He noted that traditional
notions of fiscal responsibility these days seem to be beyond the capacity of
both Democrats and Republicans.
“Today’s
Republican Party is very different from the Republican Party of fiscal
conservatism long ago. Republicans are borrow-and-spend, Democrats are
tax-and-spend. But the reality is that tax cuts do not pay for themselves, and
it’s often easier to build bipartisan support around something when you borrow
to make it happen rather than tax,” he said, according to The Hill.
The House
version of the Senate’s retirement bill, known as Secure 2.0, was the second
major retirement bill to pass a chamber of Congress in only three years, according
to The Hill. It received nearly unanimous support and a vote of 414-5 with
every Democrat present voting for the bill. It was opposed by some Republicans including
House Freedom Caucus Chairman Andy Biggs (R-Ariz.) who voted against it.
While most
industry watchers oppose the bill on the basis that it is not paid for and
hence would contribute to an already deepening national deficit, others think
the bill is paid for.
In a June 21
letter posted by the U.S. Chamber of Commerce, the American Bankers
Association, the National Association for Fixed Annuities, the Insured
Retirement Institute and other financial and retirement industry trade groups
thanked Senate Finance Committee Chairman Ron Wyden (D-Ore.) and ranking member
Mike Crapo (R-Idaho) for the legislation, according to The Hill.
“Talk to the
folks on the committee, the members of Congress. They don’t think it’s a
gimmick, and that’s why they’ve used this. This is a fully paid-for bill. It
has to be paid for in order to pass — that’s the rule of Congress — and these
are the mechanisms they came up with,” Paul Richman, head of government and
political affairs at the Insured Retirement Institute, a retirement industry
lobbying group, said in an interview, according to The Hill.
These
include an expansion of the saver’s tax credit, which subsidizes retirement
account contributions for people at the low- or middle-income level by giving
them a 50 percent government match for contributions up to $2,000.