Posts Tagged "Senate"

Enhancement to Savers Tax Credit is Minor

The Savers Tax Credit sounds great on paper. Low-income people get a federal tax credit for saving money for retirement.

But this part of the tax code always seems to disappoint.

The House recently overwhelmingly passed a bill, the Secure Act 2.0, that – along with numerous other retirement provisions – makes the savers credit more generous for some low-income workers.

Under current law, taxpayers can get one of three credits – 10 percent, 20 percent, or 50 percent of the amount they save in a 401(k). The Secure Act, which is now headed for the Senate, would somewhat increase the top income levels for the 50 percent credit – from $20,500 currently to $24,000 for single taxpayers and from $41,000 to $48,000 for married couples. The dollar value of the caps on their credits would remain at the current $1,000 and $2,000, respectively.

The House bill would also eliminate the 10 percent and 20 percent credits for higher-income workers and begin phasing out the dollar caps once taxpayers exceed the $24,000 and $48,000 income levels.

The proposed tweak to the tax structure “is not a dramatic change to who gets the credit,” said Samantha Jacoby, the senior tax legal analyst for the Center on Budget and Policy Priorities.

The House also failed to fix the fundamental flaw in the savers credit: it is non-refundable. This means workers who don’t owe any taxes don’t qualify. Without refundability, Jacoby and Chuck Marr write in a recent report, the House bill “ignores a critical reason why so few people with low and moderate incomes claim the credit.”

Disappointment with the tweaks to the savers credit is apparent in the context of the entire bill, which gives much more to higher-income people. For example, the House increased the age that taxation of 401(k) withdrawals kicks in from 72 to 75. Some retirees with modest incomes will tap their savings long before that and won’t benefit from the provision.

“Overwhelmingly, the people who will benefit from this bill are the people who are higher income and already have secure retirements,” Jacoby said.

Another barrier to use of the savers credit is a lack of awareness that it exists. The share of tax filers who claim the credit has increased in the past 20 years but still hasn’t reached 10 percent, according to a report by Transamerica Institute. …Learn More

Family Medical Leave blocks

Small Business Backing of Paid Leave Grows

The pandemic exposed inequities in the U.S. healthcare system. It also revealed a related shortcoming in our workplaces: the lack of mandated paid family and medical leave for most Americans – and especially lower-paid workers.

The United States is the only developed country that does not have a national policy of paid time off for an extended period for illness or maternity leave. In that way, we are keeping company with places like Micronesia and Tonga.

Many major employers do offer sick time and paid or unpaid maternity leave. Even so, 60 percent of the highest-paid workers, who tend to work in larger companies, don’t have access to paid leave for themselves or a family member for extended periods for a severe illness, according to the National Partnership for Women and Families. The situation is much tougher for lower-paid workers, who are concentrated in small business: 93 percent lack access to paid leave.

Last month, the House approved a reconciliation bill that would mandate four weeks of paid leave for all workers in the event that they or family members become ill. It’s uncertain whether this provision of the reconciliation bill will clear the Senate.

The National Federation of Independent Business (NFIB) has opposed paid leave in the past, arguing that workers who take extended time off strain under-staffed small employers. Although the federal government would pay a supplement to employers for the leave under the House bill, NFIB said the required paperwork creates administrative headaches.

But this position isn’t supported by small business owners, according to a new study. Even prior to the pandemic, they were in favor of a paid leave policy for employees to take care of family members – and COVID has only strengthened their resolve.

In the fall of 2019, 62 percent of small businesses in New Jersey and New York were very or somewhat supportive of paid family leave, the researchers found. By the fall of 2020 – after months of wrestling with how to handle employees whose family members had contracted COVID – small employers’ support had jumped to 71 percent. …Learn More