11/03 Erik Paulsen Correspondence Corner : Protecting 401K (or his re-election?)

PREFACE :
Erik Paulsen regularly issues a video Correspondence Corner in which he responds to constituent questions.
It is a great ploy — Congressman Paulsen determines what question is to be answered … thus, providing him an opportunity to portray himself as effectively responding to issues that he wishes to address as if they are the most critical issues that voters want addressed.
The MN Political Roundtable will be evaluating Congressman Paulsen’s responses and encouraging readers to offer their own assessments.

Today’s topic: H.R.1 – Tax Cuts and Jobs Act and your 401k

Tomorrow’s topic: H.R.1 — Tax Cuts and Jobs Act for small business


Wanna bet that when James of Plymouth heard that Congressman Erik Paulsen was promising a “Once-in-a-Generation Tax Reform Bill”, he didn’t expect to be finding out that he would lose one of his favorite tax shelters … but that was the rumor.

James wasn’t the only one that sounded the alarm when Ways and Means Committee Chairman Kevin Brady said that his committee is considering revising the cap on total 401(k) contributions.

Background : The IRS had just announced that in 2018, employees who participate in the employer sponsored plan will be able to contribute as much as $18,500 per year — up from $18,000 — and Chairman Brady was proposing a cap of $2,400 as part of H.R. 1, the Tax Cuts and Jobs Act. The rumor prompted OpEds, such as Congressional Scrooges want to cut 401(k) contribution limit, and many complaints on Congressman Paulsen’s social media sites.

So, the good news is that Congressman Paulsen says that is not included.
(Hmmm …. anybody wonder if this was a leaked idea so that Republicans could say that they have rejected it to help “protect the middle class” ?)
Also, the other piece of good news is that Congressman Paulsen is listening …. (or is it spinning?)

OK … let’s put this into some perspective using the Vanguard’s “How America Saves 2016” report.
In 2015, Americans earning less than $30,000 per year contributed an average 4.4%, which works out to $1,320, or less, per year. Alternatively, workers earning between $30,000 and $49,999 contributed 5.5% to their plans; between $75,000 and $99,999 contributed an average 7.7% of their earnings to these plans, and workers earning $100,000 or more contributed an average of 8.3% of their income.

Hmmm … so this in essence, the more money you make the more likely you are to take advantage of this program. Obviously, the workers earning $30,0000 would not be impacted … and since the average income in America is $46,409, a worker could defer 5.1% of their income into a 401k plan and still be at the Brady-limit of $2,400.

So, who is Congressman Paulsen protecting … the low income worker, the average worker or the highly compensated worker ?
Who can afford to put $18,500 into their 401k retirement plan ?
Well, consider that employers have the ability to contribute $36,500 to your 401k (for a total pre-tax contribution of $55,000 for 2018), it’s pretty easy to see the answer.

Hmmm …. is Chairman Brady on the right path ? If the concept is to “support middle-income families“, what if the $18,500 limit was lowered ?
Remember Congressman Paulsen’s objective — tax reform should “throw out special-interest loopholes that are primarily used by those with connections in Washington” ?
Maybe not to $2,400 but why not revert to the rate established by the Tax Reform Act of 1986 (ya know 31 years ago) which set the amount an individual could contribute to a deferred compensation plan at $7,000 ?
Gosh, if it was good enough for Reagan, why not Erik Paulsen ?
Think about it … $7,000 that would easily handle someone earning $90,000 (plus they could have an employer match of another $14,000). Should a cap of $7,000 be discussed ?

Nah, the purpose of the Paulsen Correspondence Corner is to provide him an opportunity to portray himself as effectively responding to those Minnesotans who “are living paycheck to paycheck” … you know, to allow “middle-income and working families to keep more of their dollars earned” … it’s right there in his press release.

Anyone else think Chairman Brady was teeing up an issue that he knew would never be enacted.

That’s the concern as you look at all the “reforms” ideas being presented … how many are just like the “devastating Death Tax”, they sound like working families could be impacted … but they are not.

The one fact that Congressman Paulsen fails to mention is that his “reform” allows for the government collect to $1.5 TRILLION less revenue for the next 10 years.

Yep, that makes Erik Paulsen a Fiscal Fraud.

If all ideas should be considered, than Chairman Brady’s idea deserves to be discussed with the emphasis on where the cap should be … $2,400 is too low … $18,500 is too high, maybe Reagan was right at $7,000.

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