President Barack Obama's State of the Union speech Jan. 20 mentioned only broadly his vision for helping middle-class workers save more for retirement, but he's poised to submit proposals to Congress on Feb. 2 as part of his fiscal 2016 budget.
Prior to Mr. Obama's speech, the White House offered details on proposals for achieving his goals related to retirement savings and rebalancing a tax code the president said favors the wealthy.
However, the necessity of several of his ideas was questioned by industry sources, as well as by Orrin Hatch, R-Utah, incoming chairman of the Senate Finance Committee, who set out the committee's top priorities before the U.S. Chamber of Commerce on Jan. 19.
Mr. Hatch criticized Mr. Obama's tax reform proposal targeting high-income taxpayers, including increasing the capital gains tax rates to 28%. Mr. Obama also will propose in the budget a seven-basis-point fee on leverage held by financial institutions with assets of $50 billion or more. Mr. Obama's plan “appears to be more about redistribution, with added complexity and class warfare ... than about tax reform,” Mr. Hatch said.
“The United States already has among the highest integrated capital gains and dividends rates in the developed world,” said Kenneth Bentsen Jr., Washington-based president and CEO of the Securities Industry and Financial Markets Association, in a statement. “The president's proposal would push us further out of step with our economic competitors and would worsen the existing bias for debt over equity financing. The tax code is not the place for a broad, new and duplicative financial regulatory regime.”
Messrs. Obama and Hatch did agree on the need for a starter 401(k) plan to spur more workplace retirement savings. Mr. Obama would require employers with 10 or more employees that do not now offer retirement plans to enroll workers, including part-time employees, in automatic individual retirement accounts; workers would have the right to opt out of the plans. Smaller employers offering an auto IRA, or adding an auto feature, would get a tax credit.
The starter plan is part of Mr. Hatch's SAFE Retirement Act proposal the Senate committee is expected to take on. That proposal also would expand the use of multiple-employer plans and allow public defined benefit plans to purchase private annuities.
“I remain convinced that my plan represents the best solution to the growing pension crisis in America,” Mr. Hatch said.