The Tax Man Cometh?

The GOP plans to introduce the much anticipated tax reform proposal this coming Wednesday. Regardless of where your loyalties lie on the political spectrum, a major reform of this magnitude will be provocative, to say the least.

Almost every American agrees that our tax code is woefully complex and loaded with provisions for special interests. In addition, American companies need a better government partner to compete with foreign companies, many of which are subsidized by their own governments or, in the case of China, where the government is part-owner.

One provision that will likely be a component of the initial tax proposal is a reduction or curtailment of tax-favored retirement plan contributions in both the public and private sector. While there are arguments on both sides as to whether or not pre-tax contributions to retirement plans have an impact on the amount Americans save for retirement, we need to be cautious. Americans are already not saving nearly enough for retirement, so tampering with any retirement plan provisions should be carefully examined.

The larger concern is that it has been decades since we have engaged in a serious examination of the overall issue of retirement in America. Washington has  been somewhat remiss in  more closely examining how we make Americans better prepared for retirement. Sadly, the possible changes to the current pre-tax provisions of existing law are not being made in the interests of prudent public pension policy. Rather, they are being considered for the sole purpose of raising tax revenue. That’s not a good place to start if you want to undertake efforts to improve the ability of Americans to provide for a comfortable and secure retirement.

As the debate over tax reform begins this week, let’s be mindful of the ultimate impact on working Americans,  who are already facing a number of obstacles to their ability to save and plan for a secure retirement.