The first part of the report deals with retirement tax incentives, both at work and in the individual market. Citing stats that suggest, "Only 54 percent of all workers (excluding federal employees) and 65 percent of all such full-time workers participate in an employer-sponsored retirement plan according to the Bureau of Labor Statistics," the report dives right into the Draconian by suggesting limits or even outright eliminations of retirement saving tax preferences, such as:  

• Significantly reduce or repeal all tax expenditures for retirement savings and replace with automatic enrollment or expanded Social Security benefits;
• Reduce limits on tax-preferred contributions to retirement plans to, for example, $14,850 for defined contribution plans and $4,500 for individual retirement accounts, or to a percentage of taxpayer's income;
• Alternatively, could temporarily or permanently repeal inflation indexing for limits on tax-preferred contributions;
• Cap the value of deductions and exclusions for defined contribution plans to 28 cents per dollar contributed;
• Disallow further tax-preferred contributions to defined contribution or defined benefit plans once the total value reaches the equivalent of, for example, $3 million or roughly $200,000 annual annuity at today's interest rates;
• Eliminate higher "catch up" contributions limits for those age 50 years or older;
• Require inherited IRAs to be distributed within five years (with exceptions for a beneficiary within 10 years of the account holder's age, individuals who are disabled or with special needs, a minor, or the IRA holder's spouse);
• Repeal deduction for dividends paid by C corporations to employee stock ownership plans;
• Repeal non-deductible IRAs.

Obviously the slashing of tax-incentived retirement options at work would cripple enrollment. You think participation's bad now, it would nosedive without some kind of carrot for employees, and that's if employers continued to offer them in the absence of any tax benefit.

But it's not all so bad. The committee throws out a number of other ideas, as well, such as encouraging auto enrollment, and even boosting tax incentives for companies and individuals. Additionally, the committee proposes:

• Incentive increases for life insurance, annuities and long term care plans;
• Simplifying and setting up new plan options for employers;
• Pulling out the stick for employees dipping into their plans prematurely but making it harder, if not impossible to do withdraw or borrow from them;
• Establishing a "Lifetime Savings Account" for each child born in the United States, starting with a federal government contribution of, for example, $500 and expanding 529 plan options.

There's some real potential here, both good and bad. It's clear the politicians want to address the drain on the national budget that these tax deductions pose, but it's equally apparent that we're a nation not very good at saving (for retirement or anything else). So, as taxpayers, do we invest in a system that helps encourage that now? Or do we just spend more to take care of everyone who didn't plan later on? Because, it will be one or the other.

Check back tomorrow, when we look at some of the suggestions the committee had on employer-paid health care plans – and the tax benefits of those, as well.