Democrats: Avoid Reforms That Would Hurt Middle-Income Taxpayers

September 26, 2017

The Honorable Kevin Brady
Chairman
Committee on Ways and Means
1102 Longworth House Office Building
Washington, D.C. 20515

The Honorable Paul D. Ryan
House Speaker
1233 Longworth House Office Building
Washington, DC 20515

The Honorable Steven T. Mnuchin
Secretary of the Treasury
U.S. Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, DC 20220

The Honorable Mitch McConnell
Senate Majority Leader
317 Russell Senate Office Building
Washington, DC 20510

The Honorable Gary D. Cohn
Chief Economic Advisor
The White House
1600 Pennsylvania Avenue, NW
Washington, DC 20500

Dear Chairmen Brady and Hatch, Speaker Ryan, Leader McConnell, Secretary Mnuchin, and Mr. Cohn:

As you prepare to release tax reform details this week, we encourage you to protect the tax incentives for middle class retirement savings. Millions of Americans depend on the favorable tax treatment of retirement savings to prepare for their financial futures, and it would be unconscionable to undermine their financial security to fund tax cuts for corporations and the wealthy. We instead ask you to work with us to develop a tax plan that enhances how millions of hardworking Americans are able to save for retirement.

American families rely on 401(k)s, IRAs, and other savings vehicles to build long-term financial security. For middle class families yearning for economic stability and a better future for their children, reducing or eliminating the incentive for retirement savings could put them on shaky financial ground.

Not only would reducing or eliminating the tax incentive for retirement savings hurt working Americans, it could also damage the economy. Americans have saved over $26 trillion in retirement plans, and that savings provides businesses with the capital they need to move the economy forward and create jobs. Without an incentive, savings rates could plummet, damaging our economy and putting jobs at risk.

We have heard of proposals that would mandate the use of after-tax, Roth accounts for retirement savings and eliminate, in whole or in part, the traditional, tax-deferred treatment of 401(k) and IRA contributions. Families deserve the option of choosing the type of account that is most beneficial based on their unique circumstances. If they are forced to use Roth accounts, some people may stop saving altogether, and those that continue to save could see a material reduction in their take-home pay. For many people, this would pit their desire to save for retirement against other necessary spending, such as housing, child care, and other daily expenses. Requiring partial Roth treatment, as some have proposed, does little to address that concern and only serves to make the system more complex for individuals and businesses. Moreover, mandating Roth savings may result in business owners — particularly small business owners — deciding not to sponsor a retirement plan at all and thereby endangering millions of Americans who work for small businesses and depend on employer-sponsored retirement plans.

Importantly, the revenue generated by mandating Roth accounts is largely illusory. As you know, retirement plan contributions are generally tax deferred, not tax exempt. It is only because of the 10-year budget window that mandating Roth is even viewed as a revenue-raiser.

Rather than pursuing shortsighted budget gimmicks that put the middle class at risk, we urge you to champion policies that strengthen and expand the retirement system based on sound policy that works for all Americans.

Sincerely,

The Honorable John B. Larson

The Honorable Richard E. Neal

The Honorable John Lewis

The Honorable Mike Thompson

The Honorable Ron Kind

The Honorable Joseph Crowley

The Honorable Linda T. Sánchez

The Honorable Terri Sewell

The Honorable Suzan K. DelBene

The Honorable Sander M. Levin

The Honorable Lloyd Doggett

The Honorable Earl Blumenauer

The Honorable Bill Pascrell, Jr.

The Honorable Danny K. Davis

The Honorable Brian Higgins

The Honorable Judy Chu