Expanding the Savings Horizon:
Tax-Preferred Saving Proposals Lead the Way
ACCF Capital Formation Forum
September 2003
"We have passed two major tax bills plus a tax stimulus
package since 2001," the Honorable Charles E. Grassley (R-IA), chairman
of the Senate Finance Committee, told ACCF supporters at the July 8 Capital
Formation Forum. "Among the 'unfinished business' on our tax agenda is
legislation that promotes saving and investment," he noted.
Senator Grassley offered his outlook on the prospects for
action some of this unfinished business, including pension reform as well
as energy legislation and a resolution of the FSC/ETI issue, during the
remainder of the congressional session.
Praising the ACCF's advocacy of capital gains tax cuts as
an effective stimulant to investment and economic growth, Senator Grassley
noted that "it is seldom that you have the opportunity to demonstrate
that reducing taxes on capital can both promote saving and investment
and increase Federal revenues."
Turning to the congressional tax agenda for the remainder
of the session, the Finance Committee Chairman stressed that the combination
of "9/11" and the economic downturn has made cutting taxes considerably
more difficult. Among other key issues, the interest rate used for pension
plan funding and lump-sum distribution calculations needs to be resolved
prior to the end of the session because the temporary rate extension runs
out at the end of the year, Senator Grassley observed. He stressed that
the sole criterion for the interest rate should be accuracy.
The Bush Administration has offered its proposal to address
the interest rate question and Senator Grassley said he and Senator Max
Baucus, the ranking Democratic member of the Finance Committee, would
be reviewing the Treasury proposal and other options. Pension simplification
measures and reform are more likely to be considered over the longer term.
Individual empowerment remains the driving principle for
Senator Grassley when it comes to retirement savings legislation.
"Providing workers with diversification rights so that they
can better manage their retirement accounts is very important," he observed.
Senator Grassley noted that energy legislation is also coming
up in the near future. While he said he does not foresee much difficulty
passing the tax provisions of the energy bill in the Senate, navigating
the House and Senate conference on energy legislation will be more difficult.
The focus for Senator Grassley and his colleague Senator
Pete Domenici (R-NM), chairman of the Senate Energy Committee, is to "get
it done on time," he said.
Among other pressing issues is the need to send legislation
to the President to replace the ETI/FSC export regime and thereby avoid
the imposition of trade sanctions by the European Union on American products
by the end of the year. Senator Grassley stressed that he and Senator
Baucus are addressing this issue in a bipartisan fashion.
Looking beyond this year's calendar, Chairman Grassley affirmed
his desire to be a party to sweeping tax reform.
"I hope I am in Congress long enough to see that," he said,
adding that major tax reform would require debate during a presidential
election with a clear victory for one position to garner the support needed
for such a dramatic change in policy.
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