A blue-ribbon panel of D.C. tax-policy wonks joined American Retirement Association (ARA) CEO Brian Graff at the recent NAPA 401(k) Summit in Nashville to discuss potential legislation impacting retirement plans.
Graff set the stage by noting that the industry will experience an inflection point when the Tax Cuts and Jobs Act expires in 2025. This will lead to a major tax policy debate regardless of whether Joe Biden or Donald Trump wins the election and whether Democrats or Republicans control the House or the Senate.
According to the Congressional Budget Office, extending many of the Act’s provisions would cost $3.5 trillion. The federal fiscal situation is quite different than it was 10 years ago, including pandemic deficit spending. The national debt is approaching $35 trillion, which amounts to over $100,000 of debt for every American.
With that, he welcomed the panelists to the stage—Jamie Cummins, Senior Tax Counsel with the United States Senate Committee on Finance; Shannon Finley, Founding Partner at Capitol Counsel; and Preston Rutledge, former Assistant Secretary for EBSA and Founder and Principal of the Rutledge Policy Group.
Graff asked Cummins where he thought the Republican caucus was on the need to pay for any extensions of the Tax Cut and Jobs Act provisions.
After issuing a disclaimer that his opinions are his own, Cummins said there are varying views on the Republican side about the need to pay for the extensions. His boss, Sen. Mike Crapo (R-Idaho), the ranking Republican on the Senate Finance Committee, has publicly stated that he doesn’t believe the pro-growth strategies of the Tax Cuts and Jobs Act need to be offset.
“There are a lot of opinions out there on the Republican and Democratic sides about that, and so we shall see,” Cummins added. “Now, that being said, finding offsets is a very tricky topic. I will also note that the Tax Cuts and Jobs Act also had a number of offsets in the domestic and international business space, among other things. That’s a long-winded way to say that we shall see.”
Finley said it will depend on the elections. Democrats are very focused on rebuilding the economy after the COVID pandemic, which she argued is reflected in the Inflation Reduction Act and investments in infrastructure.
“The important thing is to realize that every time you want to reduce the deficit, you have to either raise taxes, cut benefits, and cut things that people rely on,” she explained. “That gets tricky, and it’s a hard political maneuver. Democrats, I think, are still trying to figure that out, waiting to see what happens in the election and where they are in power [compared to] Republicans. Do we have the House, the Senate, the White House, and what we can do? It also depends on who’s leading in those various bodies and what happens with the current White House chief of staff.”
Graff asked Rutledge about a Beltway phrase, “behind the tree.”
“I’m glad you asked,” Rutledge replied. “It’s a phrase that comes from legendary Senator Russell Long (D-La.), the chair of the Finance Committee decades ago. He had a saying about tax negotiations, “Don’t tax you, don’t tax me. Tax the one behind the tree.” It means that if you’re not negotiating, you’re the interest group that will end up with the short end of the stick when a bill gets drafted. If you’re not at the table, you’re on the menu. So you want to be at the table. That’s what the ARA has always done. It’s been there early, often, and consistently. What you all need to do is embrace that.”
Graff noted the increasing attacks on the private retirement planning system, particularly 401(k)s, and played a CNBC video clip of a conservative think-tank member predicting the demise of their tax incentives.
“The attacks on the retirement plan system have ranged from getting rid of 401(k)s to pay for Social Security to replacing it with a government-run plan,” Graff said.
“At a recent hearing of the Senate HELP [Health, Education, Labor and Pensions] Committee, Senator Bernie Sanders said our retirement system is a disaster for working people. He’s pushed it beyond crisis. Now we’re a disaster, and he suggested bringing back defined benefit plans.”
While he added that no one is seriously considering these ideas currently, “the real concern is that as the larger tax debate begins, the negativity around 401(k) plans makes it easier for Congress to tap into the retirement savings tax incentives to pay for all that stuff.”
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