On May 23, 2013, the Senate Finance Committee released the seventh in a series of papers compiling tax reform options that Finance Committee members may wish to consider as they work towards reforming our nation’s tax system. The title of the paper is Economic Security: Health, Retirement, Life Insurance, Fringe Benefits and Executive Compensation. The options discussed in the paper are taken from suggestions by witnesses at the 30 hearings held on tax reform to date, bipartisan commissions, tax policy experts and members of Congress.
At the outset, the paper recognizes that the tax code plays an important role in individual economic security by encouraging retirement savings and making employer provided healthcare more affordable. However, these protections written into the code also are some of the greatest tax expenditures and an easy target for tax reform.
While this paper is merely a compilation of ideas put forth to reform the tax code, it gives us an idea of the framework in which tax reform proposals will take shape. Listed below are some of the recommendations made in the paper, for a more detailed description of each recommendation, visit the Senate Finance Committee’s website at www.finance.senate.gov.
- Limit or eliminate tax preferences for retirement saving,
- Replace deductions, exclusions and credits for retirement savings with a single refundable tax credit,
- Increase retirement savings incentives,
- Attempt to increase effect of tax expenditures for retirement savings on retirement security,
- Simplify the process of selecting and administering a plan for employers,
- Establish new plan options for employers,
- Reduce "leakage" from retirement plans,
- Allow more flexibility in distributions from retirement savings accounts,
- Offer other long-term savings vehicles.
- Reduce tax expenditures for employer provided health benefits,
- Modify the Affordable Care Act,
- Expand the tax benefits for health,
- Expand long-term care benefits
- Reform excise taxes and other tax provisions that may affect health.
Life Insurance and Annuities
- Reduce tax expenditures for life insurance products,
- Reduce tax expenditures for annuities.
Other Employee Fringe Benefits
- Limit exclusions for other fringe benefits including meals, entertainment, housing and private aircraft,
- Expand tax preferences for education,
- Equalize exclusion for employer-paid parking and transportation benefits.
- Revise the limits on the deductibility of executive compensation,
- Revise the rules related to non-qualified deferred compensation,
- Revise the rules related to equity-based compensation,
- Revise the rules related to golden parachute payments to executives upon a change in control.
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