Biden has pledged to change the current deductibility of common retirement offerings into matching refundable credits for 401(k)s, IRAs, and others.
The purpose of Biden’s plan is to equalize the playing field of tax deferral in traditional retirement accounts, with the intention of boosting profit among low-income earners.
Although industry experts advised that by reducing the benefits that higher earners receive, the Biden campaign may have raised the likelihood of businesses ditching those retirement benefits entirely.
"If you take the tax deduction away and reduce the tax benefit, without also addressing the nondiscrimination rules, you've blown up the bargain," said Brian Graff, the CEO of the American Retirement Association.
That's because companies who make offerings to a 401(k) must offer that same benefit to their employees, FBN said. Under Biden's plan, business owners would have to decrease their own tax benefit, while still contributing on behalf of their employees, which is very expensive, especially during a pandemic.
Some of those bosses — traditionally the higher-income earners — may lack the motivation to offer those retirement accounts if their tax benefit is cut, Graff said.
"When you mess up that bargain, you're disincentivizing those small business owners from having that plan anymore," he said. "Not only is it unfair to those small business owners, it's going to reduce the likelihood that they're going to offer those benefits to their employees. And that's particularly acute in a challenging time like now."
"Tens of millions of people" could lose their plans as a result of the intended change, Graff explained. Small businesses, which would be the most affected by the new dictates, employ about 58.9 million people, or 47.5% of the nation's workforce.
Yet, President Trump has not announced an official tax plan—nor, indeed, any party platform—in association with the expected election. Though, there are tax policy differences that are evident between the Biden plan and the president’s opinions, based on the tax-law modifications already established during the Trump administration, as well as on the president’s public remarks. The president has considered further reductions in ordinary and capital gains rates including even a capital gains holiday.
The 2017 legislation decreased federal income taxes drastically through reductions in top rates for high-income individuals and corporations, and increased business deductions; it gave only minor changes for low- and middle-income taxpayers.
The bottom line is that under the Biden tax plan the Trump Administration’s tax cuts for high-income individuals and corporations would be dropped while pre-2017 tax rates would be returned, and alternative minimum taxes and taxes on investment income and estates would grow.