Michael Hiltzik: Republicans want to slash tax deductions for your 401(k). That's actually a good idea!
When word leaked out a few weeks ago that House Republicans were thinking of drastically slashing the tax deduction for 401(k) contributions, retirement experts, Wall Street bankers and Democrats joined together to sound the alarm.
To them, this reeked of denying the ordinary retirement saver a tax break in order to deliver a big tax cut for the rich. Asset managers predicted a sharp drop in 401(k) balances for workers whose annual contributions went from tax-free to taxable, and therefore became more expensive. The cut in deductibility looked enormous, reducing the maximum tax-advantaged contribution to as little as $2,400 a year from the current $18,000 (or $24,000 for workers over 50).
As it turns out, however, this may be the rare idea from the GOP caucus that could help the middle class. The tax deductibility of 401(k) contributions actually may be leaving people with less money in retirement, not more. Most people
