What type of logic says if you tax more by reducing the amount of the deductible on the higher income employees (normally officers of the company), that will be an incentive for the lower earner into saving more?
"Gee, my boss is getting screwed by the government, I think I will add 2 % to my 401 K contribution"
More like I'm next...to get the screw
And a third potential problem, said Schweiss, is that the more restrictions on tax benefits we impose on retirement plans, the less attractive it will become for a business owner to sponsor a plan. “And who loses then?” he asked “The worker, not the business owner.”
Oh' Wait the "evil" business owner offers the plan....
Well, guess what: he wants to take advantage of the 401 K rules and defer his taxes as well, take away the incentive to do so and he may not want to deal with all the administrative costs in having a 401 k and just give his employees a different plan like "Here's your bi-weekly $25.00 saving bond"
Simple. There will be no more business owners.
Because “It’s the right thing to do”.