It's becoming crystal clear that one of the central issues that Americans will vote on this November is whether they side for the party that wants everybody to have more money, or the party that wants everybody to have less money.
It's hardly news that Americans save too little. Yet for the past two decades, while the personal savings rate has headed mostly down, politicians have mostly only remarked (or despaired, depending on temperament) on that fact.-- Lead Editorial, Wall Street Journal Posted by Vanderleun at January 16, 2004 6:34 AM | TrackBackBut now it looks like somebody is going to do something about it. Our good friend, Mr. Rumor, has it that on Tuesday night President Bush will revive the proposal for two new tax-exempt savings accounts in his State of the Union address.
The first, a lifetime savings account, would allow individuals of any age and any income to contribute up to $7,500 a year. Interest and investment income would accumulate tax-free and withdrawals could be made at any time, for any purpose, without a tax penalty. Permitting tax-free withdrawals distinguishes this account from the current, more specialized, medical or education savings accounts by offering savers immediate, penalty-free liquidity.
The second, a retirement savings account, would be similar to a Roth IRA but much more powerful. Like current IRAs, withdrawals would not be permitted until a certain age is reached. Interest and investment income would grow tax-free and withdrawals would also be tax-exempt. But the new account would more than double the contribution to $7,500 a year, per individual, and has no income caps for eligibility. (Currently, to be eligible for a Roth IRA, joint income cannot exceed $160,000.)