Originally posted on CUInsight.com
Guest post by Dennis Zuehlke, Compliance Manager, Ascensus
With the photo-ops and swearing-in ceremonies over, and the presidential inauguration now a memory, the 113th Congress is hard at work facing a number of contentious, but familiar, issues, one of which is tax reform.
To avoid a U.S. default on its debt obligations, the House of Representatives approved an extension of the debt ceiling. The Senate passed the measure shortly thereafter and President Obama is expected to sign the bill into law. The legislation suspends the $16.4 trillion limit on government borrowing until May 18 to give Congress time to reach a broader deficit reduction deal.
Next on the agenda, Congress and the White House must reach an agreement on nearly $85 billion in targeted spending cuts to avoid the automatic across-the-board cuts that would kick in March 1 if a deal is not reached. Agreeing on $85 billion in spending cuts will not be easy and reaching that figure means that potentially everything—including retirement savings incentives—is on the table. As Congress looks for ways to reduce the deficit, tax incentives for retirement savings are especially susceptible because they cost the Treasury more than the deduction for home mortgage interest and are second only to the exclusion of employer healthcare contributions. The Joint Committee on Taxation estimates that the exclusion of pension contributions and earnings in defined benefit and defined contribution plans will cost the Treasury $100 billion this year alone.