Just as President Barack Obama is calling on Congress to close tax loopholes and deductions to reduce the deficit, Investment Company Institute is touting a survey that shows a majority of Americans don't want lawmakers to change tax incentives for retirement savings.
A poll of 4,000 U.S. households conducted by the ICI found that 85% of the respondents disagree that Congress should eliminate tax deferrals associated with defined-contribution retirement products such as 401(k) plans.
By similar margins, respondents rejected curbing retirement tax breaks. In the survey, 82% of all respondents opposed reducing individual contribution limits, while 79% opposed limiting employer contributions.
The survey, which was conducted between mid-November through the middle of January, showed that 79% of the respondents agreed that maintaining retirement-savings tax breaks should be a “national priority.”
“More than 80% of DC-owning respondents said the immediate tax savings from their retirement plans were a big incentive to contribute,” said the report, scheduled to be released Thursday.
The ICI is attempting to convince lawmakers that such sentiment is pervasive as it tries to protect retirement-savings tax deferrals during congressional deliberations over tax reform and deficit reduction. Republicans and Democrats are eyeing hundreds of millions dollars annually of so-called tax expenditures — deductions and other breaks — for a variety of potential purposes, including lowering individual tax rates and paying for reductions in social-insurance programs.
On Tuesday, Mr. Obama promoted the idea of slicing tax expenditures, although he did not specify which ones he had in mind. In his 2012 budget, Mr. Obama proposed capping tax deductions at 28%.
Such a limit would undermine the ability of 401(k) plans to build retirement savings at a time when accumulating retirement assets for an aging population should be a priority, according to Paul Schott Stevens, ICI's president and chief executive.
“It would have the effect of eroding interest and participation in the 401(k) system — and that would be a tragedy,” Mr. Stevens said.