Introduction of the Better Future For American Families Act

INTRODUCTION OF THE BETTER FUTURE FOR AMERICAN FAMILIES ACT-HON. JOHN B. LARSON (Extensions of Remarks - October 07, 2004)

Mr. LARSON of Connecticut. Mr. Speaker, I rise today to introduce the Better Future for American Families Act. This legislation will help increase access for low- and moderate-income American families to private retirement investments. Families are struggling to make ends meet and this tax credit will give them an extra incentive to invest in their future.

Since Social Security was created in 1934, the model for retirement savings has been a three-legged stool. The three legs of that stool are: Social Security benefits, private pensions, and personal savings and investment. Without one of those legs, the stool wobbles. As Reinhard A. Hohaus, an early private-sector authority on Social Security, explained, "Each (leg) has its own function to perform and need not, and should not, be competitive with the others. When soundly conceived, each class of insurance can perform its role better because of the other two classes." Unfortunately, some are advocating for a significant weakening of Social Security by taking funds away from this leg of the stool by allowing workers to invest some of their Social Security taxes in personal accounts. Instead of weakening Social Security, I propose that we strengthen incentives for all Americans to invest in their retirement.

For years, Americans worked their entire careers with one company and could rely on a generous pension coupled with Social Security benefits to provide for a comfortable retirement. This is no longer the case. Workers change jobs more often, pensions have become less reliable in this world of Enron accounting, and the Social Security trust fund will be strained by the retirement of the baby boomers. In this environment, workers should be investing in individual retirement accounts, but due to rising costs in housing, health care, and other necessities, many families are no longer able to save for the future. While Congress has passed laws to create IRAs and 401(k) plans to encourage investment, more than 90 percent of the tax benefits the federal government offers to help families save go to households earning more than $50,000. We need to broaden these incentives to include all Americans, especially those whose struggle to cope with the costs of living here and now are causing them to ignore their future financial security.

One of the most sensible tax credits enacted by the Economic Growth and Tax Relief Reconciliation Act of 2001 was the Saver's Credit, which offered low- and moderate-income workers up to a dollar-for-dollar credit for contributions to an individual retirement account or a qualified employer-sponsored plan. The credit phases out rapidly as income rises, so this is truly a tax break for middle class Americans. Unfortunately, this tax credit is scheduled to expire in 2006. Even worse, as the Republican majority tries to extend every other tax cut from 2001, to the benefit of the wealthiest, this expiring tax credit for middle class Americans is being ignored.

My legislation would make the Saver's Credit permanent and would significantly expand the program to give help to millions by increasing benefits for families earning less than $50,000. Additionally, although 57 million taxpayers are eligible for the maximum credit on paper, 80 percent of them cannot actually benefit because they do not have income tax liability. These families need as much help as anyone and my legislation would make them eligible for the Saver's Credit by making it a refundable tax credit.

Mr. Speaker, I believe that this tax credit is the most fiscally responsible avenue for Congress to encourage personal savings and ensure that American families have financial security during their retirement years. Stripping money from Social Security only shifts the wobbling leg of the stool. This legislation would strengthen all legs and provide a solid foundation for retirement for all Americans. I encourage all of my colleagues to join me in supporting this legislation.