Lifetime Savings Account Bill
Introduced In Congress
Legislation opposed by the life insurance industry creating tax-favored individual savings accounts has been introduced in Congress.
The legislation, S. 2263, is based on a savings proposal developed by the Bush administration called Lifetime Savings Accounts.
Under the legislation, individuals would be able to put up to $5,000 annually in an account, earn interest tax-free and withdraw the money at any time for any reason without penalty.
The legislation is sponsored by Sen. Craig Thomas, R-Wyo., and Rep. Sam Johnson, R-Texas, and is backed by the Bush administration.
Deputy Treasury Secretary Samuel W. Bodman, who spoke at a press event, praised the concept of LSAs.
LSAs, he said, will help millions of families pursue the American dream. They will also allow individuals and families the flexibility to save for emergencies and to enhance their retirement savings, Bodman said.
He noted there has been a steep decline in personal savings.
“This is not acceptable,” Bodman said. “We must reduce the barriers to savings and the simplicity and flexibility of LSAs does just that.”
He added that greater national savings translates into higher investment and capital accumulation, which in turn means higher productivity, increased output, higher wages and higher living standards.
“Only in America is a penny saved, a penny taxed,” added Johnson.
That, he said, is perhaps why the savings rate in this country is in the single digits.
“That is just wrong,” Johnson said.
Frank Keating, president of the American Council of Life Insurers, Washington, praised Thomas and Johnson for drawing attention to the savings crisis, but added that LSAs would not effectively address it.
“The LSA would permit individuals unfettered access to their money, undermining the best intentions for increasing our national long-term savings,” Keating said.
Recent research, he said, finds that a majority of Americans would likely spend money from tax-free retirement savings accounts if there are no penalties for early withdrawal.
Research also indicates, Keating said, that LSAs may lead to a reduction in retirement plans sponsored by small businesses.
Reproduced from National Underwriter Edition, April 2, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.