FACT CHECK: Viral Post Claims Joe Biden Proposed Taxing 401(k) Retirement Accounts
A viral Facebook post shared over 7,500 times claims Democratic presidential nominee Joe Biden has proposed taxing 401(k) retirement accounts.
There is no indication Biden has proposed taxing 401(k) accounts. He has proposed “equalizing tax benefits” for using such accounts with a flat refundable tax credit.
Social media users have shared multiple dubious claims about the former vice president’s tax plan. This particular Facebook post alleges, “Biden slipped up and came out saying he was going to tax your 401k is anyone paying attention.”
There is, however, no indication Biden aims to tax 401(k) retirement accounts if elected president. Such a proposal does not appear on Biden’s official campaign website. The viral post appears to be misrepresenting Biden’s proposed reforms on how 401(k)s and IRAs will be treated under the tax code.
Under current law, traditional retirement accounts allow people to defer taxes on contributions, making them deductible when calculating adjusted gross income, according to the Tax Foundation. Taxes are paid on 401(k)s when you withdraw the funds.
Biden has proposed “equalizing the tax benefits of defined contribution plans” so that “low- and middle-income workers will also get a tax break when they put money away for retirement,” according to his campaign website. He aims to do so by giving taxpayers a flat refundable tax credit that policy analysts estimate would be about 26 percent instead of a tax deduction, according to CNBC.
Gordon Mermin, a senior research associate at the Urban-Brookings Tax Policy Center, told Check Your Fact in an email that “there is no proposed ‘tax’ on 401ks” in Biden’s plan. (RELATED: Has Joe Biden Proposed An Annual 3% Federal Tax On Homes?)
“Under the Biden plan, 401ks are still tax subsidized for everyone, but some 401k contributors get more subsidy than under current law, some are unaffected, and some get less tax subsidy,” Mermin explained. “Everything about 401ks is the same under the proposal (grow tax free, pay tax on withdrawal) except the tax treatment of contributions. Instead of contributing with pre-tax dollars, you contribute with after-tax dollars and get a refundable tax credit.”
He said that “everyone still sees their taxes reduced when contributing to a 401k,” noting that “Some contributors with incomes below 400,000 will get larger tax subsidies than under current law, some with incomes below 400,000 will see no change in their tax break for retirement saving, and contributors with incomes above 400,000 will generally get smaller tax subsidies than under current law.”
In an analysis of Biden’s proposed refundable tax credit for traditional retirement vehicles, the Tax Foundation’s Garrett Watson said that it “takes the rising value of deductibility by income level and converts it into a flat deduction” that would benefit “taxpayers in the 10 percent and 12 percent tax brackets,” while reducing the benefit for those in higher tax brackets. Watson also noted that the credit is “expected to be roughly revenue neutral.”
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