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Biden Tax Plan Could Force Companies to Cut Retirement Benefits

Biden Tax Plan Could Force Companies to Cut Retirement Benefits
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By    |   Sunday, 18 October 2020 07:32 AM

Democratic presidential nominee Joe Biden plans to upend the traditional tax preferences of retirement accounts like 401(k) plans could force some small companies to cut those benefits, industry experts warned Fox Business Network.

Biden has vowed to convert the current deductibility of traditional retirement contributions into matching refundable credits for 401(k)s, IRAs and others, Fox Business Network explained.

The goal of Biden’s plan is to level the playing field of tax deferral in traditional retirement accounts, with the intent of boosting saving among low-income earners. But industry experts cautioned that by reducing the benefits that higher earners receive, the Biden campaign may have increased the likelihood of businesses abandoning those retirement benefits altogether, Fox Business Network said.

"If you take the tax deduction away and reduce the tax benefit, without also addressing the nondiscrimination rules, you've blown up the bargain," Brian Graff, the CEO of the American Retirement Association, told Fox Business Network.

That's because employers who make contributions to a 401(k) must offer that same benefit to their workers, Fox Business Network said. Under Biden's plan, "business owners would have to reduce their own tax benefit, while continuing to contribute on behalf of their employees, which is expensive, particularly during a pandemic," Fox explained.

Some of those bosses — traditionally the higher-income earners — may lack the incentive to offer those retirement accounts if their tax benefit is slashed, Graff told Fox Business Network.

"When you mess up that bargain, you're disincentivizing those small business owners from having that plan anymore," he said. "Not only is it unfair to those small business owners, it's going to reduce the likelihood that they're going to offer those benefits to their employees. And that's particularly acute in a challenging time like now."

"Tens of millions of people" could lose their plans as a result of the proposed change, Graff estimated to Fox Business Network. Small businesses, which would be the most affected by the new rules, employ roughly 58.9 million people, or 47.5% of the nation's workforce, Fox Business Network said.

For his part, President Donald Trump has claimed that his re-election would bring prosperity but that a victory by Biden would lead to recession, in an escalation of his economic attack on the frontrunner weeks before the election.

“It’s the choice between historic prosperity under my pro-American policies or very crippling poverty and a steep depression under the radical left,” Trump said last week. “It’s a choice between a socialist nightmare and the American dream.”

Trump, speaking from the White House Rose Garden, delivered an online economic address to Wall Street and corporate leaders just weeks before the election. He broadly pledged new cuts to business and personal income taxes if re-elected, without giving specifics, Bloomberg reported.

The president has stepped up warnings in recent weeks that Biden and Democrats would hurt the economic recovery while claiming his re-election would lead to rapid job growth.

He said that in a second term, he’d cut middle-class taxes, further reduce regulations, and impose tariffs on companies that move from the U.S. to other countries.

Trump claimed that Biden’s election would lead to “the highest business tax rate in the developed world” and that millions of jobs would move “out of America and into China.”

He said Biden wants to raise taxes by $4 trillion, a reference to a plan by Biden that stretches over a decade and is aimed at high-income earners.

Meanwhile, Biden’s proposals would increase taxes by $2.4 trillion over a decade -- about $1.6 trillion less than previously estimated partly because of the pandemic’s impact, according to new figures from the Urban-Brookings Tax Policy Center.

The updated estimate revises figures published by the group in early March and takes into account new ideas from the Biden campaign, as well as the slowdown in the economy because of the coronavirus pandemic that likely will force a one-year delay for putting tax increases in effect, Bloomberg reported.

The estimate also excludes some provisions that the left-leaning Tax Policy Center said they could not adequately model, including a measure to repeal some tax breaks for real estate.

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Democratic presidential nominee Joe Biden plans to upend the traditional tax preferences of retirement accounts like 401(k) plans could force some small companies to cut those benefits, industry experts warned Fox Business Network.
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2020-32-18
Sunday, 18 October 2020 07:32 AM
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