The Obama budget's 2 new (bad) tax ideas - the retirement account "cap," and another anti-ESOP proposal
As a litigator, I look at every President's yearly budget like an opening offer at the start of mediation - it might be what you want, it might be a test balloon, it might be a number of things, but what it certainly is not is what the final solution will look like. It's a first offer, not the final offer, let alone the final agreement.
But if the "first offer" in President Obama's budget contains any insight for us in ERISA Group, it has two bad, "anti-retirement" provisions. The first is the one that made the news late last week - the proposed $3 million cap on tax-advantaged retirement accounts, such as the 401(k), IRAs, etc. It is being pitched as a way to prevent future Mitt Romneys from accumulating IRAs with over $100 million, but it has a number of serious problems for small business owners, and for retirement savings in general. Here's a link to a story from Time that nicely summarizes the numerous problems, both conceptually as well as practically, with the proposal -
The second problem has not been widely reported, but appears to be another example of the Obama administration's hostile view toward ESOPs. The budget would eliminate the deduction at IRC S. 404(k) for dividends paid by C corporations to employer securities held by an ESOP. This provision of the tax code was added in 2002; the budget proposes repealing it. With tax reform now in the works, this proposal may be moot as a budget issue, but is likely an accurate reflection of what the Obama administration thinks about ESOPs; this is just the latest of a number of anti-ESOP proposals that have come from the administration. Here's a link to a story summarizing this proposal, and The ESOP Association's criticism -