U.S. Rep. Tom Price of Georgia has some specific concerns about President Barack Obama’s proposed budget.
A post on the Roswell Republican’s Twitter page summarized his objections.
“POTUS’ budget adds 2 new tax increases to IRA & 401(k) savers. A total tax increase of $14billion. #ObamaTaxHike,” it read.
POTUS is an acronym for president of the United States.
A PolitiFact Georgia Twitter follower was skeptical about whether Price had his facts right and asked us to investigate.
Price spokesman Ryan Murphy explained the congressman’s claim. Price was referring to two changes in the proposed budget. The first would require some beneficiaries of individual retirement accounts to take their inherited distributions over a five-year stretch. The second change would limit the accrual of tax-favored retirement plans. It would cap how much money people could accumulate in tax-deferred retirement accounts at $3.4 million.
“The total revenue impact comes to $14.253 billion over ten years,” Murphy said via email.
A White House report Murphy forwarded us detailed Murphy’s claim. The report includes both proposed changes that Murphy mentioned. It also contains a table that says changing the rules for beneficiaries would bring in an additional $4.9 billion in revenue to the federal government over 10 years. By creating the cap, the chart shows the federal government would pocket an additional $9.3 billion over 10 years. Together, it’s slightly more than $14 billion, as Murphy said.
The White House communications department asked us to send our questions in writing. We did so twice and did not get a response.
Grover Norquist, the outspoken leader of Americans for Tax Reform, wrote about these proposed changes in a list of the top 10 tax increases in Obama’s budget.
Some experts say the percentage of Americans who would be affected by these changes is small. Less than 1 percent of IRA and 401(k) account holders have more than $3 million in their portfolios, one study shows.
Eric Toder, an expert at the Tax Policy Center in Washington, agreed these changes would affect a small number of Americans. Toder said by limiting the beneficiary withdrawals to just five years, “you are going to be paying more taxes.” Tax experts say the five-year requirement makes recipients withdraw a larger sum of money, but it could also put that person into a higher tax bracket and make him pay more in income taxes.
Currently, there’s no limit on how much you can accumulate in a retirement account. If approved, investors would have to put more money in taxable accounts once they exceed the limit, Forbes.com says.
Toder said there’s been some discussion on Capitol Hill about limiting the accrual, but he doesn’t think there’s much interest in Congress to make either one of these changes.
Still, is it accurate to label these as tax increases since they’re not typical changes in a tax rate? Toder compared it to changing the mortgage interest deduction on income taxes, an idea that was discussed during last year’s presidential race. For homeowners, he said, such a change would be a tax increase.
“Technically, they are tax increases,” he said of the proposed changes.
William McBride, the chief economist at the nonpartisan Tax Foundation in Washington, agreed with Price’s assessment.
“Yes, these count as increases,” McBride said via email.
To sum up, Price claimed on Twitter that the president’s budget includes two new tax increases that would total $14 billion. The changes could add that much money to Uncle Sam’s coffers over a 10-year period.
Calling them tax increases is a matter of semantics. That could imply it would affect large numbers of people who got Price’s tweet. The changes would affect a very small percentage of account holders, studies show. That’s important context that is missing.
We rate Price’s claim Mostly True.
Twitter post by U.S. Rep. Tom Price, May 1, 2013
Email from Ryan Murphy, spokesman for U.S. Rep. Tom Price, May 3, 2013
Email interview with William McBride, chief economist, Tax Foundation, May 13, 2013
Employee Benefit Research Institute study on the impact of a retirement savings account cap, April 12, 2013, www.ebri.org/pdf/PR-1017.Advise.10Apr13.RetCap.pdf
Forbes.com, “What Obama’s New Budget Proposal Could Mean For Your Finances,” April 18, 2013, www.forbes.com/sites/financialfinesse/2013/04/18/what-obamas-new-budget-proposal-could-mean-for-your-finances/
Human Events, “Norquist: Top Ten Tax Hikes in the Obama Budget,” April 12, 2013, www.humanevents.com/2013/04/12/top-ten-tax-hikes-in-the-obama-budget/
Blog post by Jamie Dupree on revenue changes in Obama budget proposal, April 10, 2013, www.wsbradio.com/weblogs/jamie-dupree/2013/apr/10/revenue-plans-2014-obama-budget/
Telephone interview with Eric Toder, fellow, Tax Policy Center, May 6, 2013
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