“THERE ARE very serious long-term implications that cannot be ignored,” said James T. Brett, president and CEO of the New England Council
The New England Council is growing concerned.
The group, an alliance of business, academic and health institutions and public and private organizations in New England, says some in Congress are eyeing the elimination of certain tax incentives for retirement savings as a way of raising revenue. The council has made a public call for lawmakers to resist that urge.
James T. Brett, president and CEO of the New England Council, answered five questions on the issue.
PBN: You’ve put out a news release urging Congress to preserve tax incentives for retirement savings. What incentives are in danger of being eliminated?
BRETT: Under the current tax code, individuals can deposit earnings into several types of retirement savings accounts, such as 401(k) accounts or IRAs, and not pay taxes on those earnings until they are withdrawn from those retirement accounts at some time in the future. This tax deferral is meant to encourage individuals to save for the future and achieve financial security. There has been some recent discussion among leaders in Congress of eliminating this incentive as a means to increase federal revenues.
PBN: How are these different from other tax “breaks?”
BRETT: These are different because these are not really tax “breaks” but rather tax “deferrals.” While individuals do not have pay taxes on funds that they deposit into qualified retirement savings accounts such as 401(k)s or IRAs, they will eventually pay taxes on the funds when they withdraw from those accounts at some point in the future. As a general concept, the government is not losing tax revenue—they are just receiving the revenue at a later date.
PBN: What has been the extent of your lobbying efforts?
BRETT: We sent a letter to each member of the New England Congressional delegation on June 20 outlining our concerns with eliminating retirement savings incentives. In addition, we’ve been working closely with the Boston Financial Services Leadership Council to educate a range of policymakers and the public about the importance of encouraging individuals to save for their future.
PBN: Why is eliminating these kinds of incentives such a problem, especially if it helps raise revenues?
BRETT: There are very serious long-term implications that cannot be ignored. We are concerned that, with less incentive to save for retirement, many Americans will find themselves financially unprepared for the future. This could ultimately place an additional burden on our already-strained federal entitlement programs, which could cost us far more than any short-term savings we might garner.
PBN: Is this simply a case of financial-services firms looking to preserve their revenue streams?
BRETT: While financial-services firms certainly have a stake in this issue, the ramifications of eliminating these kinds of savings incentives extend far beyond the financial-services industry. It will have long-term consequences in terms of the personal financial circumstances of our rapidly increasing retiree population. But it is also important to remember the significant impact that the financial-services sector has on the regional economy here in New England – they are some of our largest employers.
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