EXTENSIONS of REMARKS May 15, 1980 EXTENSIONS of REMARKS

11530 EXTENSIONS OF REMARKS May 15, 1980 EXTENSIONS OF REMARKS CONGRESSIONAL YOUTH ADVI Senate, which seems to have the best As long as inflation keeps increasing the SORY COUNCIL REPORT: chances for passage, leans toward an initial demands on the social security system, this GREENE COUNTY-MAD RIVER $100-200 (joint return) interest exclusion constant increasing in taxes to meet recipi TOWNSHIP for the saver. ent requirements can only continue, taking However, these types of tax incentives are more out of the worker's' pockets. costly, have only a minimal effect on capital The proposal deals with changing the way HON.CLARENCEJ.BROWN formation, and do not provide enough of an social security benefit requirements are met. OF OHIO incentive for the average taxpayer to save. If instead of drawing directly from the tax He will still lose money as a result of infla payer, a reserve fund was instituted to meet IN THE HOUSE OF REPRESENTATIVES tion. these requirements, the fund could be in Thursday, May 15, 1980 All of the savings incentives proposals vested in a productive way. Eventually the returns from the investments could be used e Mr. BROWN of Ohio. Mr. Speaker, that have been introduced have been made on the assumption that savings are possible. in covering future increases in recipient re the issue of how to encourage Ameri Many lower-income people, at the present quirements and in paying social security cans to save more to provide addition inflation rate, simply do not have any benefits, and social security taxes would be al capital for investment was the topic money to save. The incentives being pro put into the fund instead of being paid di of study by the Greene County-Mad posed give the middle class a slight break, rectly to the recipients. River Township Committee of this while excluding the poor and providing Except for an increase in social security year's Congressional Youth Advisory more loopholes for the wealthy. A proposal taxes while the fund is being accumulated, Council, which I sponsor. I would like is necessary that will benefit all workers in this would have the overall effect of lower the United States. ing social security taxes. In addition, the in to share the committee's recommenda vested fund would be forming capital and tions with my colleagues in the House. COMPLEXITY IS PROBLEM strengthening the economy. Following is the report of the Another problem with many savings in Thus, this proposed alternative to savings Greene County-Mad River Township centives is their complexity. If the average incentives would not only cut the drain on Committee: consumer does not understand how he can taxpayers' paychecks, but would be anti-in GREENE COUNTY-MAD RIVER TOWNSHIP benefit through the savings plan, he will flationary in that the social security funds CYAC COMMITTEE not save. The ideal incentive will be a would be forming capital through produc simple, direct idea that benefits all econom tive investment. SAVINGS INCENTIVES ic classes. Such a proposal has not yet been TAX INDEXING The rate of personal savings in the United devised. As a part of the general plan to reduce States is at its lowest point in thirty years, There are also valid reasons to believe currently at a rate of 3.3 percent-the taxes, to increase savings, and to make tax that savings incentives will not have a no policy more equitable, tax indexing has lowest of all major industrialized countries. ticeable positive effect on the economy. Pre Not only is this level of savings the lowest, been proposed. Rising incomes, trying to sumably, savings incentives would draw keep up with the cost of living, push taxpay but it is also declining while savings rates in money from the spending part of the econo other countries are on the rise. Why does a ers into higher tax brackets. Today's aver my <recall that inflation is caused by too age worker, though, has had no real in country with one of the highest per capita much money chasing too few goods and incomes in the world not have a much crease in spendable income since 1965; still services), and make it available to the pro his rising income has forced him into higher higher savings rate? ducing part of the economy. For one thing, most other nations encour tax brackets. As the consumer puts money away, this Under the current tax code, tax revenues age private savings, especially. by the small not only reduces his cash on hand, but also saver; however, a disincentive to save exists rise about 16 percent every time prices rise provides more money to banks to lend to by 10 percent. Indexing would hold govern in our nation. For instance: wards productive investments. This means In West Germany, married couples may ment revenues to 10 percent increases when that the prime lending rate would go down, prices rose 10 percent. This prevents infla receive tax-free a cash grant of 14 percent as, if the lending institution had more of the amount invested in qualified securi tion from pushing taxpayers into higher tax money, it would be more willing to lend it brackets just because they receive a cost of ties <up to about $26,000). out on the risk of a productive investment. In Japan, interest on savings deposits up living increase. to $14,000 is tax-free. However, there is a question as to whether ELIMINATION OF INTEREST CEILINGS In France, a division is made between in or not savings incentives will cause enough savings to make any noticeable effect on the The committee supports the recent pass terest income and taxable income, for tax age of legislation eliminating federal restric ation purposes. market economy. Because savings incentives appear as a tax break, they would, unless tions on the amount of interest paid on sav Great Britain also offers incentives in tax ings accounts. free interest up to $135, and in National tremendously effective, reduce revenue through taxation, and this revenue would Under the bill, lending institutions would Savings Certificates up to $2300. have to be made up somewhere, in just as be free to pay savers whatever they want, INFLATION FACTORS large a bite on the taxpayer as before he within six years <current law limits a pass Inflation in the United States is now run saved. Therefore, while this committee sup book saver to 5.5 percent interest at a com ning at an annual rate of over 18.5 per cent, ports savings in general as a means of: con mercial bank). and for most people, it just does not pay to tributing to capital investments; providing SAVINGS INCENTIVES: GREENE COUNTY save. At a savings .and loan, the 5.5 per cent greater productive capability; and providing MAD RIVER TOWNSHIP RESOLUTIONS return on a passbook savings account results new jobs, which would raise the nation's While this committee supports savings as in a 13.5 per cent net loss. Another contrib standard of living, we do not feel that sav a method of controlling inflation, we do not uting factor in the declining savings rate is ings incentives would be ·effective enough to feel savings incentives are a practical reflected in present tax laws. The Internal substantially increase savings. method of achieving a rate of capital forma Revenue Code is structured so that an indi Several alternatives to savings incentives tion that would appreciably improve current vidual is taxed on his earnings. If he in the formation of capital were considered economic trends. chooses to save "after-tax dollars," the in by the group, which chose these as most terest received on these savings is taxed viable: PRODUCTIVE INVESTMENT OF SOCIAL SECURITY again, hence-double taxation. In addition, FUNDS this individual's incentive to save is further PRODUCTIVE INVESTMENT OF SOCIAL SECURITY Resolved, that the present method of pay discouraged since he is able to deduct inter FUNDS ment of social security benefits be revised est charges paid throughout the year on Under the present social security system, by investing social security payments pro consumer purchases on his tax return. the payment of social security benefits is a ductivity in the American economy; and A number of bills have been introduced in "pay-as-you-go" operation, drawing the that social security benefits be paid off the Congress during the past year concerning needed benefits directly from the taxpayers. revenues from these funds. tax incentives. The bill in the House of Rep Thus, as the social security system expands, The resolution was defeated on a show of resentatives, and a similar proposal in the it places a greater burden on the taxpayer. hands vote following debate. e This "bullet" symbol identifies statements or insertions which are not spoken by the Member on the floor. May 15, 1980 EXTENSIONS OF REMARKS 11531 TAX INDEXING below. It looks like time has run out of the burden imposed by the inflow of refu Resolved, that the tax code be revised for many of the people of Haiti. gees, the federal government assistance that such that tax brackets more equitably re [From the Washington Post, May 8, 19801 will be made available should be shared by flect real income by increasing all fixed the Haitians as well as by the Cubans. dollar amounts in the income tax tables by THE HAITIAN EXCEPTION We must not abandon the Haitians to the the percent that the Consumer Price Index <By Andrew F. Brimmer) almost certainly dismal fate that former rose in the corresponding time. I have been deeply concerned by what ap Haitian officials have described in sworn The resolution was approved by a stand pears to be a serious disparity in treatment testimony to be awaiting any Haitians de ing vote following amendment to insert the between Cuban refugees-who have been ported back to that country.

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