AAII Survey: How Readers Would Change the U.S. Tax Code


After weeks of speculation, Congressional Republicans unveiled their tax reform legislation late last week. Among the items it didn’t include was a cut to contribution limits to 401(k) retirement plans, a move lawmakers were reportedly considering to help balance the tax cuts planned for high-income earners and businesses. According to the language in the tax reform proposal, it appears 401(k) tax-free contribution limits will stay at $18,000. For savers ages 50 and over, that limit is still $24,000. (It’s worth noting the contribution limit will increase by $500 next year for savers under the age of 50, the IRS announced in October.)

There were rumors that Republicans were considering cutting the 401(k) contribution limit by thousands, raising fears of working-aged people such as myself who, through their 401(k)s and 403(b)s, contribute tax-free money to save up for retirement.

AAII Weekly Survey Question

With all of the focus on 401(k) plans, last week’s survey question asked:

Where do you hold your retirement assets?

Here are the results:

Based on these results, it seems that the vast majority of our readers would not have been impacted by cuts to 401(k) or 403(b) contribution limits. Of the readers that responded, only 14.5% of their assets are held in employer-sponsored defined contribution plans such as 401(k) and 403(b) plans.

For our readers, the bulk of their retirement assets are held in personal retirement accounts such as traditional IRAs and Roth IRAs (48.0%).

In second place with 22.1% are taxable brokerage accounts.

Reflecting the decline in employer-sponsored defined benefit plans over the years, only 5.3% of the retirement assets of our readers are held in these types of accounts.

Weekly Special Question

The debate over the proposed tax reform is just heating up. To get an idea of how our readers would handle the tax code, last week’s special question asked:

If you were revamping the U.S. tax code, what major changes would you make?

In all, 364 readers offered their suggestions on how to change or improve the U.S. tax code.

Surprising to me, the number one suggestion was to limit or remove deductions of exemptions on mortgage interest.

The second-highest number of suggestions related to implementing a flat tax.

Rounding out the top three suggestions was lowering the corporate tax rate.

From there, the suggestions became more closely grouped. Among the other top vote-getters for reforming the U.S. tax code were:

  • Lower personal tax rate
  • Add more personal deductions for things such as investments, savings and health care
  • Increase taxes on the wealthy
  • Close corporate loopholes
  • Bring corporate profits parked overseas back to the U.S.
  • Lower capital gains and dividend income tax rate

Here is a sampling of the responses:

  • “Shift from taxing income & production to taxing consumption.”
  • “Simplify, simplify, simplify.”
  • “Tax overseas profits. Increased taxes on the wealthy and corporations. Reduced corporate welfare.”
  • “Make the corporate tax code identical to what real people pay.”
  • “Go to a flat tax type system, eliminating all deductions except charitable deductions, with progressive tax rates.”
  • “First cut government spending!”
  • “National sales tax!”
  • “No earned income credit.”
  • “Do away with the IRS. Create a VAT tax with no federal taxes. Make everyone pay into Social Security, which includes our politicians. Lower the corporate tax rate to 15% and bring home all monies in foreign countries.”
  • “Don’t tax Social Security at any level.”

Everybody has an opinion! Why not give us yours? Participate in our weekly member poll, updated every Monday, and see the results online at www.aaii.com/memberquestion.


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