TRUMP CONSIDERS GUTTING POPULAR TAX EXEMPTION IN ORDER TO FUND CORPORATE TAX CUTS

President Donald Trump was elected, in part, because of his championing of income tax reform, with promises of a simplified structure of tax rates for individuals and lower tax rates on corporations.

Yet at no time during the campaign did the president signal that the way his administration would pay for those moves would involve taking away one of the most popular and widely used tax breaks in the income tax system.

Now, though, lawmakers are reportedly looking at removing the upfront tax deduction for traditional 401(k) contributions, and some proposals have even suggested taking away part of the tax deferral that 401(k) plans provide. With most Americans already saving an inadequate amount toward their retirement, changes to the rules would only take away a key incentive for setting money aside for the future and punish those who prudently plan for their retirement.

One big problem involved in corporate tax reform is that it would be costly. Cutting tax rates from 35% to 15% would result in a drop in revenue, and many lawmakers want to ensure that any tax reform legislation is revenue-neutral.

To achieve that, Congress would have to couple tax cuts with ways of raising revenue.

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