Retirement tax breaks get boost

House votes to make law permanent allowing greater contributions to funds

? Legislation to make permanent a law that allows increased contributions to tax-favored 401(k) and IRA plans won easy House passage Friday, the latest in a string of election-year votes by Republicans that underscored their stance as tax cutters.

By a 308-70 vote, the House sent the Senate a bill to remove a 2010 expiration or “sunset” date from a series of retirement tax breaks.

All four Kansas representatives voted to remove the 2010 expiration date from a series of retirement tax breaks.

“By passing this legislation today, we are giving workers the peace of mind they need as they plan for retirement,” said Rep. Rob Portman, R-Ohio.

The vote came after the House rejected along party lines a Democratic alternative that would have raised taxes on corporate executives. Sending their own political message, Democrats accused Republicans of inaction on the Enron Corp. pension debacle and the flight of U.S. companies to Bermuda to escape taxes.

Rep. Lloyd Doggett, D-Tex., said, “Let me tell you, the people who’ve got the money, honey, are the people running this Congress.”

The retirement breaks are part of last year’s 10-year, $1.35 trillion tax cut, which because of a budget rule would vanish at the end of the decade unless extended by Congress. House Republicans passed a permanent extension of the package this year, then broke it into pieces and staged votes on some individual parts such as the higher 401(k) and IRA contributions.

Despite its popularity, the retirement segment, like the others, faces an uphill fight in the Democratic-run Senate. Supporters including the Bush administration said they hoped the House vote would increase pressure on the Senate to follow suit.

The measure would permit on a permanent basis increased higher annual contributions to tax-favored 401(k) plans until they reach $15,000 in 2006. They would rise based on inflation thereafter. Annual contributions to individual retirement arrangements would top out at $5,000 in 2008, also to increase based on inflation in future years.

If the Dec. 31, 2010, “sunset” date is not repealed, both retirement-plan contributions would drop to 2001 levels, and numerous other changes, including higher “catch-up” limits for people over 50 and easier rollover rules for people who change jobs, would disappear.