Perhaps you’ve had a similar dilemma with your household budget: How do you cut back expenses when your spending must increase? Tax reform, long touted as a hallmark of the Republican party platform, may be difficult to achieve with all the recent expenses the country has encountered.
When Donald Trump was first elected president, there was positive momentum in the stock market in anticipation of his pro-business, pro-tax reduction policies. These days, however, Congress appears to be looking for ways to pass legislation that looks like tax cuts but would actually help increase short-term revenues.
For example, some House Republicans have suggested rolling back the tax-deferred status of 401(k) plans.1 This would put the 401(k) on the same level as a Roth IRA, only with higher annual contribution limits ($18,000; or $24,000 for those age 50 and up). While that would result in no taxes on distributions during retirement, investors would pay more taxes on income while working. This may reduce the incentive to save with a 401(k), which is extremely important given the retirement income shortfalls many people are facing.