Two analysts at the conservative Heritage Foundation have suggested to the White House that President Trump’s forthcoming tax plan call for allowing families to put up to $10,000 a year into savings accounts on a tax-free basis.
“Ideally, the money would be invested in a stock index fund,” Heritage senior fellow Stephen Moore and senior policy analyst Adam Michel wrote in an op-ed for The Wall Street Journal published online late Tuesday. “The goals would be to increase woefully low private household savings, to make Americans more financially stable, and to reduce dependence on government entitlements.”
Moore and Michel suggest that investing in the accounts would be voluntary and that money in the accounts could be withdrawn after five years for a variety of purposes. They add that the government would recapture lost revenue from the tax-free investments “through capital gains, income and consumption taxes when the money is eventually withdrawn and spent.”
Moore and Michel said that the accounts could be geared toward lower- and middle-income people by including an income limit of $200,000.
“These new accounts would expand ownership of stock to millions of Americans, thus democratizing the market and sharing the gains, while minimizing risk by investing in a diverse portfolio,” they wrote. “This may be the most effective way to reduce wealth inequality.”
The op-ed comes after CNBC reported last Friday that the White House was considering such an idea to incentivize investing.
Moore, an adviser to Trump’s 2016 presidential campaign, has floated tax ideas to the White House on multiple occasions.
Trump is expected to release a proposal for a new round of tax cuts later this year in an effort to draw a contrast between himself and Democrats as part of his reelection campaign. He signed a law in 2017 that cut taxes for individuals and businesses, but that measure has never become a runaway hit with the public because many voters view the legislation as providing more benefits to the wealthy than the middle class.
White House National Economic Council Director Larry Kudlow told CNBC that the White House was examining an idea for universal savings accounts in which money put into and withdrawn from the accounts would be taxed, but that profits accumulated while the funds were invested would not be taxed. Kudlow said that that no final decisions have been made.