President Donald Trump's fiscal year 2018 budget proposal contains few details about how it would affect retirement savings, except for higher costs to federal employees and new premiums for underfunded multiemployer pension funds.
The budget, unveiled May 23, includes ambitious ideas for growing the economy and balancing the federal budget by 2027. But the missing retirement details, combined with dramatic cuts to domestic spending and projections of 3% average annual economic growth, earned the proposal a cool reception from legislators, including some Republicans, who noted the Congressional Budget Office projects more modest 1.9% annual economic growth over the 10-year budget window.
Like other presidential budgets in years past, Mr. Trump's proposal “is a suggestion,” said Senate Budget Committee Chairman Mike Enzi, R-Wyo., in a statement. Congressional budget negotiators will examine the proposal, “but Congress is mandated by the Constitution with key spending responsibilities and will ultimately decide what the nation's fiscal priorities will be,” Mr. Enzi said. With the federal debt limit expected to be reached by the fall, those discussions will have increasing urgency.
One of the biggest questions was how much tax reform would help achieve the goals of the proposed budget, which calls for a 10% increase in defense spending and other initiatives that would be funded through tax reform, regulatory rollbacks and a 40% cut in non-defense spending.
The tax reform piece of Mr. Trump's budget calls for lower individual rates and a 15% corporate tax rate, with no more special-interest tax breaks.
But plan executives are keeping an eye on an accompanying tax expenditure document that prioritizes tax deductions, which shows employer deductions for defined benefit plans and defined contribution plans both ranking high on the list but behind employer-provided health care, capital gains and the home mortgage deduction.
Questioned whether the tax-reform savings were being double-counted to pay for both the projected budget savings and the cost of lower tax rates, Treasury Secretary Steven Mnuchin told a Senate Finance hearing May 25 those details were still being worked out. “We are not ready to have a full-blown tax-reform plan, so we haven't put that in,” said Mr. Mnuchin, who promised tax reform would pay for itself. When pressed, he committed to not raising the Social Security eligibility age to pay for tax cuts.
Mr. Mnuchin told the panel the best way to achieve the president's budget goal “is through a combination of tax reform, regulatory relief and trade policies that will return us to levels of 3% sustained economic growth. … This involves making some difficult decisions,” he said.
Ranking committee member Sen. Ron Wyden, D-Ore., a veteran budget negotiator, told Mr. Mnuchin to “speed this up in terms of getting us specifics. …We have to turn it into something that could actually produce a bipartisan bill,” before the fiscal year starts in October.