NCPA - National Center for Policy Analysis

TAX REFORM MUST TARGET PERSONAL SAVINGS AND BUSINESS INVESTMENT

March 8, 2005

Any tax reform proposal should include tax relief for personal savings and first-year expensing for business investment in capital equipment, says Ernest Christian of the Center for Strategic Tax Reform.

Taking the double-tax off savings gives people a fair chance to save for investment as well as retirement, says Christian. He recommends allowing everyone to set up a tax-free universal savings and investment account (USIA). This is how it would work:

  • It would function like a combination brokerage and savings account into which the owner could deposit a portion of each year's after-tax income.
  • No tax deduction would be allowed for savings deposited in the account, but all earnings on investment and all withdrawals from the account would be tax-free.

First-year expensing would stimulate businesses to install more productive capital equipment, improving the rates of return on investment.

Together these reforms would be revenue-neutral over a ten-year period, says Christian.

Source: Ernest S. Christian, "Top Billing in Any Tax Reform Plan Must Go To Saving and Investment," Investor's Business Daily, March 1, 2005.

 

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