[Congressional Record Volume 140, Number 97 (Friday, July 22, 1994)]
[Senate]
[Page S]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: July 22, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
                         ADDITIONAL STATEMENTS

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                           SUPER-IRA--S. 2301

 Mr. McCONNELL. Mr. President, I rise today to address a 
situation facing this Nation that is particularly troubling. I am 
talking about America's lack of individual savings. The United States, 
with a 4-percent rate of savings, falls far behind all other developed 
countries, and as a result, this Nation faces a capital shortage and a 
declining savings rate. I strongly support S. 2103, the Roth super-IRA, 
as a means of boosting individual savings needed to secure the long-
term economic health of this nation.
  Mr. President, this legislation encourages investment by creating 
universal access to individual retirement accounts. This bill also 
allows individuals to take a tax deduction on their contribution, or to 
contribute to a back-loaded IRA. Under this back-loaded arrangement, 
contributions would not be deductible, but earnings would be allowed to 
grow tax-free. In addition, this legislation permits an individual to 
make penalty-free withdrawals when used to cover expenses associated 
with funding higher education, placing a down payment on a first home, 
and coping with long periods of unemployment.
  Mr. President, we are rapidly approaching a time when problems 
associated with savings shortfalls will come home to roost. As our 
population ages, they will begin to dip into their retirement savings 
and frankly, Mr. President, there is nothing there.
  In the year 2000, 35 million people in this country will be age 65 or 
older. By the year 2030 that number will nearly double increasing to 65 
million. This will put an even greater burden on Social Security and 
other retirement programs including Medicare. The Social Security 
Administration estimates that the current surplus will be exhausted by 
2013.
  This Nation's low level of savings is not entirely the fault of 
American's who fail to save, but the fault of the Tax Code that 
discriminates against savings. Already, individuals must pay tax on 
their income when it is earned. If an individual saves any amount, the 
earnings gained are also taxed. Therefore, taxpayers already facing 
higher tax bills are encouraged to spend rather than save. This, Mr. 
President, is poor public policy which hurts our long-term economic 
potential.
  Prior to the Tax Reform Act of 1986, similar legislation was in place 
that created an incentive to save through an IRA. Leading up to the 
1986 tax reform, individuals savings grew steadily. In 1985, 1 in 5 
families contributed to individual retirement account compared to the 1 
in 20 that contributes today. Between 1981 and 1985, the national 
savings grew from $3.4 to $16.2 million, and according to David Wise, a 
Harvard economist, half of that money was from new savings. Since the 
elimination of universal access in 1986, savings has steadily declined.

  Mr. President, I am an avid proponent of boosting individual savings, 
especially when applied to meeting the needs of higher education costs. 
Earlier this year, I introduced S. 1787, the Higher Education Trust 
Fund Savings Act. My legislation would allow individuals to contribute 
to a back-loaded State-sponsored education savings plan that would be 
expressly used for meeting higher education costs.
  Mr. President, fewer and fewer parents can afford to write out a 
check to cover the rising costs of education. In fact, I had to take a 
second mortgage on my home to cover my two daughters' college expenses. 
Mr. President, with college tuition costs continuing to grow at 8 
percent annually, more and more students will be forced to burden 
themselves with thousands of dollars in loans or simply forego a 
college education.
  Recently, the National Association of State Treasurers held their 
annual meeting and a resolution was passed supporting my bill S. 1787. 
I value this endorsement since State treasurers are the administrators 
of these savings programs and are the on the front lines of higher 
education funding.
  Like the super-IRA bill, S. 1787 encourages savings and investment in 
our nations most important resource, education, through the vehicle of 
tax reform. Mr. President, I encourage my colleagues, who share my 
concerns regarding access to higher education, to cosponsor this 
legislation so we can ensure an educational future for our children and 
grandchildren.
  Mr. President, in closing, I urge my colleagues to add their names to 
Roth super-IRA proposal. This legislation will help strengthen this 
Nation's economic outlook, and will help families provide for their own 
future.

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