Create a retirement savings tax credit for low incomes

Obama's budget still asks for "Saver's Credit"

Updated: Wednesday, January 12th, 2011 | By Angie Drobnic Holan

At the end of 2010, President Barack Obama and Senate Republicans negotiated broad-based tax compromise legislation. The tax credit for retirement savings, which Obama calls the "Saver's Credit," was not part of that agreement. But the proposal lives on in the president's 2011 budget proposal, which has still not been passed, and it's possible the measure will be considered later this year.

"This proposal is expected to increase significantly both the number of Americans who save for retirement and the overall amount of amount of retirement wealth they accumulate," states the president's budget document.

We leave the rating at In the Works.

Sources:

The White House, Budget of the United States Government, Fiscal Year 2011, Department of Labor, page 102

Obama proposes expanded saver's credit

Updated: Monday, October 5th, 2009 | By Angie Drobnic Holan

In his budget for fiscal year 2010, President Barack Obama proposed a new saver's tax credit.

There are tax breaks in current law for low-income savers, but the tax credits are not refundable. That means if you don't owe any taxes, you don't get cash back. In theory this reduces your incentive to save.

"The proposal would make the saver"s credit fully refundable and would provide for the credit to be deposited automatically in the qualified retirement plan account or (individual retirement account) to which the eligible individual contributed," according to a statement from the U.S. Treasury Department. "Making the saver"s credit more like a matching contribution would enhance the likelihood that the credit would be saved and would increase the salience of the incentive by framing it as a match similar to the familiar employer matching contributions to 401(k) plans."

The Obama administration proposes that this measure would go into effect in 2011. Congress still needs to approve the measure. We rate it In the Works.

Sources:

U.S. Treasury Department, General Explanations of the Administration"s Fiscal Year 2010 Revenue Proposals , May 2009

Tax Policy Center, Tax Proposals in the 2010 budget , accessed Oct. 2, 2009