Third Time’s a Charm on Tax Legislation | AccountingWEB

Third Time’s a Charm on Tax Legislation

The House voted 401-25, which of course means that Republicans and Democrats alike are in the same camp on this one, to increase the annual contribution limits to the nation’s most popular retirement plans, the IRA and the 401(k). The limits, if the bill becomes law, would raise from $2,000 to $5,000 for IRAs and from $10,500 to $15,000 for 401(k) plans.

Although the plan would phase in over 10 years, people over age 50 would have special privileges that would enable them to contribute more rapidly, thus paving the way for a generation of baby boomers that actually might find itself prepared to care for itself in retirement.

Congress expects that the bill would reduce tax revenue to the government by $52.2 billion over the 10 year initiation period, but forward-thinking people have always known that increased retirement savings for the nation’s aging population will mean the amount of necessary government benefits to care for these people will also be reduced.

The White House is pressuring Congress to add language to the bill that would provide for an annual retirement account subsidy of $1,000 in the form of a matching funds tax credit for wage earners whose annual income is beneath $37,500. The thinking is that these people are less likely to save and perhaps more likely to require government benefits in their old age.

Click here to read the entire bill.

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