Fox Business anchor Charles Payne warned on Tuesday that Democratic presidential nominee Joe Biden’s tax plan could adversely impact 401(k)s, saying it could lead to “fewer people actually using these plans and fewer employers offering these plans.”
Payne made the comments in response to a viewer question during the Fox Business virtual town hall “American Votes Together.” During the event, a woman she asked whether 401(k)s will be taxed under Biden’s tax plan.
“People who are near retirement, I’m talking about people born in the 1960s, they rely on Social Security to various degrees,” Payne said. “But even for the lowest income quintile, the benefit checks only replace 77% of their income.”
The “good news,” Payne went on, is that “81% of people in the same age bracket, they have some type of retirement account.”
“Joe Biden is proposing a radical change to 401(k) programs,” Payne said. “He says it would quote-unquote ‘equalize the system’ by ending tax deductions and replacing it with a flat credit system that doesn’t change regardless of income.”
“The idea from their point of view is that it’s unfair for someone with a higher income to benefit so they’re just yanking it from everyone,” Payne continued.
He then pointed out that “potentially $3 trillion in retirement benefits … are going to be paid out over the next decade” and that “Biden would lower payments to wealthier folks and distribute it to lower income folks, even giving refundable tax credits for people who aren’t making any contributions.
“And there are all sort of schemes out there that I think will amount to fewer people actually using these plans and fewer employers offering these plans,” added Payne, who said that he was “very worried about this.”
The former vice president has said the wealthy should pay more in taxes, and that the tax code should be more progressive and equitable.
Biden has said he would repeal changes made to individual income tax rates for the wealthy (individuals with incomes over $400,000) under the 2017 Tax Cuts and Jobs Act, which means the top rate would revert back to 39.6 % from 37%.
A frequently overlooked part of Biden’s platform would upend the traditional tax preferences of retirement accounts like 401(k) plans — a change that industry experts warned could force some small companies to cut those benefits.
Biden has vowed to convert the current deductibility of traditional retirement contributions into matching refundable credits for 401(k)s, IRAs and others.
The proposal from the former vice president is intended to level the playing field of tax deferral in traditional retirement accounts, with the intent of boosting saving among low-income earners. But industry experts have cautioned that by reducing the benefits that higher earners receive, the Biden campaign may have increased the likelihood of businesses abandoning those etirement benefits altogether.
He pointed out that Biden hasn’t “explained exactly how it would work” and “there is a lot of detail that hasn’t been worked out.”
Baker then said the Biden plan “sounds as though it will be ‘fairer,’ in their terms” and that “higher taxpayers will not get as much of the benefit as they do now and more of it will go to people who pay lower taxes.”
He then explained what he thinks the problems are with Biden’s plan. “I think a lot of people will be discouraged from 401(k)s,” Baker said.
“I think the other problem is that some of the other plans that Biden has to raise corporate taxes, they’re going to lower dividends, they’re going to worsen corporate performance, so people could find themselves losing out there as well.”
FOX Business’ Brittany De Lea and Megan Henney contributed to this report.