An exchange between White House press secretary Sean Spicer and a CNBC reporter on Thursday led to a moment of confusion over whether the Trump administration’s new tax plan would mean retirement accounts lose their tax-exempt status.
It’s a move that could throw the retirement industry — with about $US7 trillion parked in 401(k) accounts, and a similar amount in IRAs — into chaos.
The White House subsequently clarified that 401(k) plans would not be on the table under the tax proposal. But the misunderstanding itself was another product of the vagueness of the tax plan, which says only that it will “eliminate targeted tax breaks that mainly benefit the wealthiest taxpayers.”
Here’s the exchange between Eamon Javers of CNBC and Spicer (you can watch below):
JAVERS: “Can you lay out what the president’s vision is for 401ks and specifically tax deductions surrounding those, does the president imagine removing those deductions entirely, or is he going to protect them?”
SPICER: “So the Secretary of the Treasury and director Cohn yesterday both talked about that the current plan both protects charitable givings and mortgage interest and that’s it.”
It was immediately apparent that Spicer could have misspoken. In rolling out the plan, Trump administration officials on Wednesday spoke about the elimination of deductions like state taxes. The administration specifically said that only charitable contributions and mortgage interest deductions would be spared.
But retirement plan contributions are tax-exempt, meaning taxpayers don’t have to report them as salary.
That’s not the only aspect of the plan that’s unclear. Earlier in the day, Treasury Secretary Steven Mnuchin said he couldn’t guarantee whether the middle class would see a tax cut under the plan, also because the proposal presented Wednesday is still short on specifics.
Still, it took a clarification after the fact from the White House to sort it all out.
Here’s the video of the press briefing. You can watch the exchange between Javers and Spicer at the 1:08 mark.
NEW: White House clarifies: 401K retirement savings plans would not be impacted by Trump’s tax proposal.
— Peter Alexander (@PeterAlexander) April 27, 2017