A controversial idea for changing defined contribution tax incentives to help more middle- and lower-income people save for retirement will get a public airing Friday before the Senate Special Committee on Aging.
The plan would replace the current retirement tax deductions, which offers savings based on tax rates, with a flat tax credit. The plan is spearheaded by Peter Orszag — former director of the Office of Management and Budget who is vice chairman of global banking at Citigroup — and research fellows at the Brookings Institution/Urban Institute's Tax Policy Center.
Proponents estimate that a 30% credit would be revenue-neutral because the tax revenue would be roughly the same as the current deduction, but acknowledge that it would reduce the tax incentives for upper-income savers. The plan has not been crafted into legislation yet but is getting attention on Capitol Hill.