Group of 6 considering taxing 401k plans

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There is broad consensus, according to five sources familiar with the behind-the-scenes talks, on some of the best ways to pay for cutting both the individual and corporate tax rates.

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Among the decisions that the White House, Treasury and congressional leaders have settled on is that any tax proposal will require U.S. companies to bring back earnings from overseas at a one-time low tax rate, a favorite proposal of the business community known as repatriation.

The corporate rate will likely fall to somewhere between 22 percent and 25 percent, depending on which deductions or breaks lawmakers are willing to scale back or eliminate — an exercise that usually brings out the special interest groups in full force and has always made any tax tweaks hard. No one familiar with the process said the corporate rate can realistically dip below 20 percent, without some new tax in place. The president has said that he prefers a rate of 15 percent.

In addition to the revenue raisers such as eliminating the deduction for state and local taxes — a benefit that disproportionately hits taxpayers in high-cost states like California, New York, New Jersey and Massachusetts — the tax negotiators are scouring former Republican Rep. Dave Camp’s 2014 tax plan for other ideas.

One idea quietly being discussed would be taxing the money that workers place into their 401(k) savings plans up front: an idea that would raise billions of dollars in the short-term and is pulled from the Camp plan. This policy idea is widely disliked by budget hawks, who consider it a gimmick; the financial services industry that handles retirement savings; and nonprofits that try to encourage Americans to save.

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