Right now you get two benefits in a standard IRA or 401(k): the tax deferral of the initial contribution, and the tax deferral of the inside buildup. If I'm reading this proposal right, the proposed change would eliminate the former but not the latter.
You can play the angles on a regular IRA vs. a Roth; as a broad proposition, it's close enough to a wash that I don't think this change would much affect IRA participation. I suspect the same would be true for 401(k)'s; it's the ability to let your money grow tax deferred for long periods that provides the real benefit, not the initial deductibility.
I disagree with you strongly on one point. A traditional IRA and a Roth IRA are hardly a "wash." While they may seem that way, you have to keep in mind that any analysis of the long-term benefits of the Roth IRA are based on the presumption that the tax treatment will never change. To me, that's a huge risk in light of our nation's $16 trillion debt and unsustainable entitlement programs.
One big advantage of a traditional IRA is that it's a "bird in the hand" (i.e., the tax deduction is current, and tangible), while a Roth IRA is "two (at best) in the bush" (i.e., the future tax exemption is always subject to change by Congress before you retire).