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Parking a link: the President’s budget

Parking a link: the President’s budget

Last updated on: February 24, 2015 at 9:22 pm by Jane the Actuary

Parking a link: the President’s budget 2015-02-24T21:22:27-06:00 Jane the Actuary

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Yes, it’s dead on arrival, so perhaps not worth spending too much time with.

But, via Forbes, here’s the administration’s spin, “Tax Reform That Promotes Growth and Opportunity.” This seems to be a document which gives he highlights of his “budget” (which contains so many new tax policies it doesn’t seem right to call it a “budget” at all), without specific details, but it’s still instructive.

Doing a quick skim:

Child care:

Everyone’s talked about, and the administration had to drop, a proposal to eliminate 529 plans. But no one has mentioned the fact that he also proposes a similar swap for child care: eliminate the Dependent Care Spending Account, which enables families to pay for child care on a tax-free basis, up to $5,000 per year, in favor of more tax credits to fund daycare for lower-income families.

The Budget would triple the maximum Child and Dependent Care Tax Credit (CDCTC) for families with children under age five. It would also make the full CDCTC available to families with incomes of up to $120,000, benefiting families with young children, older children, and elderly or disabled dependents. Meanwhile, the Budget would eliminate tax preferences for flexible spending accounts for child care expenses.

UPDATE: thinking about this some more, it really seems to miss the mark to dump the Spending Account, given that the cost of daycare is fundamentally a cost of employment, no different than permitted deductions for other expenses incurred during the cost of employment (such as the cost of professional memberships not paid for by the employer). In my view, child care ought to be fully deductible up to the net income of the lower-paid = “marginal-income” (that is, income at the margin, that can be viewed of as paying the marginal tax rate) spouse.

In this way, it’s more equivalent to existing tax breaks that allow you to pay for commuting costs — commuter train passes, for instance — pre-tax.

For the administration to lump direct payments to families in the same conceptual category as pre-tax spending shows they’re missing the point.

On the other hand, if they wanted to whack at something for which there’s no conceptual justification, it would be the Health Care Spending Accounts and the catastrophic plan-associated HSA/MSAs. The former has already been scaled back with a cap in the ACA, but was always a hard one to justify except as an outright tax break, because of the “use it or lose it” provision. Is the concept that it’s “unfair” to ask people to pay tax on money spent for medical expenses because they can’t be helped? If so, why do it in such a clumsy way?

Retirement:

The Budget proposes to automatically enroll workers without access to employer-based retirement plans in IRAs through payroll deposit contributions at their workplace (with an option to opt out).

No details here, and I am in favor of some form of mandatory provision of retirement savings (with opt out), if done right, but what is this doing in a budget document? Has the President lost any understanding of how to interact with Congress?

Also:

The Budget would prohibit contributions to and accruals of additional benefits in tax-preferred retirement plans and IRAs once balances are about $3.4 million, enough to provide an annual income of $210,000 in retirement.

This was what had me looking this up in the first place — an article in the Tribune this morning gives a somewhat different explanation:

The administration’s current proposal would cut people off from saving in their 401(k) if they are on course to have at least $3.4 million for retirement.

And further raises the issue that the definition of what it means to be “on course to have” this cash is one that could cause headaches for many people who may start their careers off well but then fall onto hard times. What’s more, neither this “budget document” nor the Trib article specifies the administration’s intention as far as people with both 401(k)s and traditional pension plans.

Now, if I go back to this document, I can work my way back to the White House site’s section on the budget, but now I’m flailing in my struggle to find any specifics. Even in a document entitled “The Budget,” it’s still just fluff without details.

So that’s it for now — and time to log in to work.

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