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PSCA Executive Reports

July 31, 2018

Tax Reform 2.0.

After weeks of speculation, House Republicans have unveiled their outline for what it being referred to as “tax reform 2.0”. As was the case last year during the initial stages of the House’s consideration of tax reform legislation, this early outline is light on details, touting instead what Republicans see as the successes of the Tax Cuts and Jobs Act and calling for making the individual and small business tax cuts in the bill permanent. Citing increased take-home pay for workers as a result of lower income taxes, the outline says 2.0 “contains a range of proposals” to help workers save for retirement. While no details are provided, industry watchers expect the legislation may borrow some elements (e.g., the Pooled Employer Plans proposal) from RESA.  

The outline also includes a number of “family-friendly savings plans.” It proposes to create a new “universal savings account” or “USA” that would provide a “fully flexible savings tool for families.”  It is possible that the USA proposal would allow individuals to make after-tax contributions of up to $5,500 to an account where monies could be used at any time for any reason. Investment earnings in that account would be tax free when paid.  The outline also suggests allowing new parents to tap into their retirement savings without penalty for the addition of a child.  The proposal would expand 529 education accounts to permit distributions to cover the costs of apprenticeship fees, home schooling, or paying off student debt.

One item not expected to appear in the final bill is “Rothification.” On Friday, June 29, a spokesperson from the House Ways and Means Committee told ARA: “Chairman Brady continues to advocate for making our tax code more family-friendly including helping future generations save for retirement. The Ways and Means Committee has no plans to revisit the issue of so-called ‘Rothification’ as part of any 2.0 proposals and any rumors to the contrary are simply not correct.” Despite this statement, given the amount of revenue that can be raised through Rothification, it is possible the committee could consider certain Roth-related proposals (e.g., previous proposals to require any catch-up contributions be made on a Roth basis).

Chairman Brady has said that he does not see tax reform as one bill, but rather “a package of two, three or four approaches.” He hopes to release legislative text in “early” August and it is likely that the Ways and Means Committee would mark up the legislation in September before Congress recesses to campaign for the November elections. 


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