Statements on Introduced Bills and Joint Resolutions

STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

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By Mr. CRAPO (for himself, Mr. JOHNSON, and Mr. BUNNING):

S. 1740. A bill to amend the Internal Revenue Code of 1986 to allow individuals to defer recognition of reinvested capital gains distributions from regulated investment companies; to the Committee on Finance.

Mr. CRAPO. Mr. President, I rise today to introduce, along with my colleagues Tim Johnson of South Dakota and Jim Bunning of Kentucky, an important bill that will allow Americans to save more for the long term and will better prepare them for a secure retirement. The Generating Retirement Ownership Through Long-Term Holding GROWTH, Act has substantial and growing bipartisan support in the House, and Senator Johnson and I are proud to introduce this bipartisan legislation that provides Americans a better tool to grow their long-term retirement savings.

The GROWTH Act would allow investors in mutual funds to keep more retirement savings invested longer and growing longer by deferring taxation of automatically reinvested capital gains until fund shares are sold, rather than allowing those long-term gains--which generate no current income or cash in hand--to be taxed every year.

To understand how beneficial this bill would be, it is important to understand the role of mutual funds in long-term retirement savings. Among households owning mutual funds, 92 percent are investing for retirement, with more than 70 percent saying their primary purpose in investing in funds is to prepare for retirement. Many of today's workers do not yet have in place the retirement savings supplement to Social Security that will prepare them for the future. In fact, almost half of American workers--nearly 71 million of 151 million workers--are not offered any form of pension or retirement savings plan at work.

Meanwhile, the number of years spent in retirement is growing and the costs individuals can expect to bear in retirement are growing, too. The Employee Benefit Research Institute estimates that an individual retiring at age 65 in 2014 will need $285,000 just to cover health coverage premiums and expenses. Individual savings efforts also face significant obstacles. Those not covered by an employer's retirement plan, for example, can set aside a deductible IRA contribution of only $4,000 this year--$4,500 if they are age 50 or older.

Mutual funds are a hugely important part of American workers' preparation for retirement, both through their employers' retirement plans and on their own. Mutual funds now make up half of the $3.2 trillion held by American workers through 401(k) plans and other similar job-based savings programs. About 34 million American households hold mutual funds through their defined contribution plans. More than 30 million American households are saving through taxable mutual fund accounts, either as supplements to their employers' plans or because they do not have such plans.

The GROWTH Act is also a good idea because it remedies an unfairness in the tax code that can make saving difficult for many Americans. Mutual fund investors who are struggling to save for retirement should not have to pay taxes on ``profits'' they have not realized. If they don't have money in hand, it makes no sense for them to have to pay taxes. The GROWTH Act would defer taxes until the mutual fund shares are sold and the investor has actual funds to pay the taxes.

The GROWTH Act would be a valuable contributor to retirement savings efforts. Mutual fund savers who automatically reinvest are doing what policymakers want to see. They are holding for the long term, contributing to national savings, and building up their own retirement nest egg. These Americans should be encouraged to save--not discouraged through a tax on automatic reinvestments. The GROWTH Act is a step that will show immediate results, a step that will help tens of millions of American savers and ``should-be savers'' over the course of their working lives, and a step that with time can make a real difference in the retirement readiness of American families.

I urge my colleagues to join Senator Johnson and me in supporting the GROWTH Act. Mr. President, I ask unanimous consent that the text of the bill be printed in the RECORD.

There being no objection the bill was ordered to be printed in the RECORD, as follows:

S. 1740

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