Lifetime Savings Accounts
January 7, 2004
President Bush has proposed, fought for, and won a tax cut each and every year of his presidency. This has been good economic policy and good politics, say Grover Norquist, president of Americans for Tax Reform, and Cesar V. Conda, a board director for Empower America.
One part of the President's 2004 tax cut is the creation of Lifetime Savings Accounts and Retirement Savings Accounts (LSAs and RSAs).
- They would allow all Americans to save $7,500 in an LSA that would accumulate tax-free and be tax-free upon withdrawal for any purpose.
- The RSA would let people save an additional $7,500 in a RSA where savings could be withdrawn tax-free for retirement purposes.
- From 1980 to 1986, annual IRA contributions rose to $38 billion from $4 billion.
- But when Congress that year limited who could save tax-deductible contributions in an IRA, the total amount of contributions fell to $15 billion in 1987, and to $8.4 billion by 1995.
Some in Congress want to gut the president's proposal, by dropping the LSA altogether or by reducing the contribution limits. This would be an economic and political mistake, say Norquist and Conda.
By replacing the present hodgepodge of six different tax-advantaged savings accounts with two large ($7,500) uncomplicated and universally available accounts, RSAs and LSAs will greatly expand the number of Americans who have direct ownership of mutual funds and stocks, and increase the savings they control.
Source: Grover G. Norquist and Cesar V. Conda, "Bush Tax Cuts, Act IV," Wall Street Journal, January 6, 2004.
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