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Tax Reform Resurfaces on Capitol Hill

The 2016 election is still months away, but talk of tax reform — and its potential to undermine incentives for retirement savings — is “back” on Capitol Hill.

The Chairman of the House Ways & Means Committee, Kevin Brady (R-Texas) intends to lay the groundwork for tax reform this year, so that a bill is ready to move quickly in the post-Obama era. In February, Chairman Brady stated: “This year, our Committee is leading an inclusive GOP Conference wide effort to produce a blueprint that details our consensus vision for comprehensive pro-growth tax reform. This blueprint will reflect consideration of the wide range of ideas and proposals that are part of an open and robust dialogue on tax reform. We’ll bring together the best elements for the pro-growth tax policy that the U.S. economy needs and that Americans have a right to expect from their government.”

On March 22, the House Ways and Means Subcommittee on Tax Policy held a hearing that exemplified this inclusiveness. The hearing aired three proposals that would fundamentally reform of the income tax system. One proposal in particular, cosponsored by Chairman Brady, would repeal the current income tax system entirely to be replaced by a national sales tax administered at the state level.

The American Retirement Association submitted a statement to the subcommittee for the hearing cautioning that repealing all income taxes would discourage small businesses from keeping their retirement plans, since the current income tax incentives are a primary reason small business owners consider offering a retirement plan. In addition, the statement reminded the subcommittee that qualified retirement plans are subject to coverage and nondiscrimination rules that require employer contributions on behalf of employees if the owner wants to maximize his or her contributions.

Alisa Wolking is the American Retirement Association’s Director of Political Affairs.