Stay Informed!

By Kristin Lawton on 05/31/2011 @ 11:46 AM

Tags: Federal Policy, Recommended Reading

In yesterday’s Washington Post article, Study: Closing tax breaks for retirement would do little to help budget, reporter Lori Montgomery looked at a new study that argues against cutting tax incentives for retirement plans, such as 401(k) accounts, to help reduce the deficit. Montgomery notes that the study suggests “the accounts would have to be closed, or contributions sharply limited to realize much in the way of budget savings – a move that could undermined some of the nation’s most popular retirement tools.”

While this study seems to look at only tax preferences for retirement plans, it’s important to remember, as the story notes, that there are a range of deductions, credits and preferential rates in the federal tax code that should be scrutinized as Congress tackles the country’s deficit and debt. A study released last fall by CFED and The Annie E. Casey Foundation found that the United States spent nearly $400 billion in fiscal year 2009 to help people save money and build wealth, but the vast majority of that money went to the nation’s richest taxpayers. By simply capping some of these deductions, it would be possible to shave $1 trillion off the deficit in the next decade. Given the seriousness of the deficit and debt problem, we must consider changes in the tax code -- even if there is a dispute over exactly how much could be saved through such changes.

Recommended Reading - Study: Closing tax breaks for retirement would do little to help budget

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