FYI: A draft bill will reduce the cap on 401(k) contributions but not to $2,400 as House Republicans had wanted, ABC News reports. The bill will lower it to a point halfway between the current limit, which is $18,000 for most people, and the preferred $2,400 that lawmakers wanted. The draft bill also retains the local property tax deduction and the complete elimination of the estate tax.
Regards,
Ted
https://www.marketwatch.com/story/report-401k-cap-will-be-reduced-but-not-to-2400-2017-11-01/print
Comments
- Estate tax - largest 0.2% of estates are subject to this tax. Money talks.
- Property (and presumably income) tax deduction - Enough Republican members of Congress from higher tax states to sink any proposal to eliminate this deduction
- 401k cap reduction - Only 1/3 of employees have access to defined contribution plans and participate; of those, only 10% max out. While it is true that nearly all who do are high earners (1/3 of $100K+ earners max out, while 4% or fewer of employees earning $75K- max out), these are still not the really high rollers involved with the estate tax. They have other mechanisms, like top hat plans, self-employed plans (with $55K limits), etc.
So few people are affected by reducing the cap, and those who do, while somewhat better off, aren't the ones pulling the strings.
The distribution of those maxing out comes from this 2017 Vanguard report, linked to by Ted:
https://mutualfundobserver.com/discuss/discussion/33534/vanguard-how-america-saves-2017
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Edit: Regarding property/income tax deductions - more complete stories report that only the property tax deduction would be preserved. ISTM that's a direct slight of mid-to-upper middle class people, especially in areas like high tax areas like San Francisco and New York, where the majority of people (64% and 51% respectively) are renters, but deduct substantial local income taxes.
Often the combination of state/local income tax and municipal property taxes is enough to exceed the standard deduction, while the property tax alone isn't. (That's especially true in NYC, where the property taxes are lower but there's a city income tax in addition to the state income tax.) So those with extremely expensive homes get to keep itemizing their property taxes, while middle class people lose the deduction, and lower class people never itemized.
"'No matter how they construct this compromise, Republicans are still socking it to the middle class and the upper-middle class, but this time picking winners and losers,' Senate Minority Leader Charles E. Schumer (D-N.Y.) said Monday."
https://www.washingtonpost.com/news/business/wp/2017/10/30/house-gop-tax-plan-would-now-allow-americans-to-deduct-property-taxes/?utm_term=.0eb51c6e000b