EDITORIAL: Retirement accounts may be affected by any tax reform plan

One of the few tax breaks spared in Donald Trump’s tax plan, along with deductions for home mortgage interest and charitable donations, is the provision that allows pre-tax contributions to retirement accounts. But that could change as more and more interests muck around in the fine print.

The Wall Street Journal reported this week that many members of Congress are apparently willing to consider altering the benefits of contributing to a 401(k) or other similar retirement plans. Such a reform would entail taxing retirement account contributions as income, but allowing tax-free withdrawals when a taxpayer becomes eligible to tap the account.

In essence, it would shift traditional IRA and 401(k) plans to Roth-style accounts. While it might be appealing to have access to tax-free funds upon retirement, levying taxes up front could dissuade folks from funding a 401(k) in the first place. Given that many Americans already struggle to prepare financially for their later years, any change could trigger a host of unintended consequences.

But politicians are seeing dollar signs. Such a reform could generate billions for the federal government.

Simplifying the tax code will entail doing away with myriad targeted tax breaks, each of which has its own vocal constituency. Which breaks survive is more a matter of politics than a result of rational policy analysis.

But as the Wall Street Journal’s Jason Zwieg pointed out last week, if members of Congress are going to ask savers to take a tax hit when it comes to their retirement accounts, they should be willing to share the pain. They could start by alleviating taxpayers of the burden of funding generous matches that pad congressional retirement benefits. According to the Plan Sponsor Council of America, while fewer than one in 10 corporate retirement plans match 5 percent of employee contributions dollar for dollar, taxpayers currently match that contribution for every member of Congress.

Whether it is wise, as part of a wider overhaul of the tax code, to modify the break currently afforded those who contribute to 401(k) accounts is a matter of debate. But Mr. Zwieg is 100 percent correct: If private retirement accounts are on the table, the generous plan covering Beltway politicians should be right there next to them.