Administration Plans To Push Its Savings Proposals Again Next Year
The Bush administration is planning a new effort to enact tax-favored individual savings vehicles that could create a disincentive for consumers to purchase annuities.
Treasury Secretary John W. Snow says that next year, the administration intends to take action to reduce regulatory burdens on retirement savings.
Two simple accounts backed by the administrationLifetime Savings Accounts (LSAs) and Retirement Savings Accounts (RSAs)will make saving for everyday life and retirement security easier and more attractive, Snow says.
“Today, there are six different savings accounts with confusing and seemingly endless rules,” he says. “The direct result is that the tax code makes it more difficult for Americans to save for retirement, or save for other key life events, such as education, health care and unexpected emergencies.”
Snow made the comments in a recent speech to the Tax Foundation.
LSAs allow individuals to save up to $7,500 annually and earn tax-free interest. Money in LSAs can be withdrawn at any time for any purpose without penalty.
RSAs allow individuals to save an additional $7,500 annually and earn tax-free interest, but the money cannot be withdrawn without penalty until age 59.
Jack Dolan, a spokesman for the American Council of Life Insurers, Washington, says that a serious, national dialogue on the best means to boost savings and the retirement security of Americans is long overdue.
Thus, he says, ACLI applauds the administration for highlighting this issue and welcomes the opportunity to stress the vital role of long-term savings in family financial planning.
“Long-term savings also are an essential source of capital for sustained and strong economic growth,” Dolan adds.
“We would be concerned,” he says, “with any initiative that would not properly prioritize long-term savings.”
In addition to LSAs and RSAs, Snow says the Bush administration will once again lobby for permanent repeal of the estate tax.
“The death tax falls on income that has already been taxed,” Snow says. “It diverts resources into tax avoidance and enforcement that could be spent in economically productive activities.”
In other news, ACLI is applauding Congress for reauthorizing the Fair Credit Reporting Act.
Allen Caskie, chief counsel with ACLI, calls final passage of the legislation “a huge victory for common sense and efficient business.”
He notes there was a lot of pressure from some anti-business factions to make the legislation much more onerous than it turned out.