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OWH Midlands Voices: Government can help Americans to save

Published April 26, 2004

BY LEE TERRY

The writer, a republican, represents Nebraska's 2nd District in the U.S. House of Representatives.

      There is a reason why U.S. economists are smiling more nowadays. Initial jobless claims are at their lowest level since Sept. 11, 2001; March marked the seventh straight month of growth in job creation; home ownership is at an all-time high; and the stock market has gained more than $4 trillion over the past year.

      As a result, more Americans are earning a paycheck and putting bread on the table than at any other time in the nation's history.

      This economic recovery has been an amazing comeback story. But there is another set of indicators that has failed to make the headlines - figures that should concern us all.

      Last year, 1.6 million Americans filed for bankruptcy, up 6 percent from 2002. Consumer debt rose to a record $2 trillion, as the average credit card debt topped $9,000 per household. The average American is saving only about 2 percent of annual income, a record low.

      While these figures have escaped most news media outlets, Congress has taken positive steps to help debt-burdened Americans by allowing them to keep more of their income.

      A year ago, Congress passed a new round of comprehensive tax relief. In all, 24 million U.S. families with children received tax refund checks ($400 per child) totaling $14 billion. Today, instead of lining Uncle Sam's pockets, this is money going to education savings accounts, home repair expenses or perhaps just basic necessities such as clothing or groceries. The point is, the money is back in the hands that earned it.

      Congress last year also reduced the tax penalty on married couples and lowered capital gains taxes from 20 percent to 10 percent. Thanks to these new tax cuts, it is estimated that Americans kept an additional $50 billion of their income for tax year 2003.

      What has this meant for Nebraska families? According to the Treasury Department:

A married couple with two children and income of $40,000 saw their taxes fall from $1,178 to $45 for tax year 2003, a decline of 96 percent.

A married couple with two children and income of $60,000 saw their taxes reduced from $3,750 to $2,850 for tax year 2003, a decline of 24 percent.

      These are meaningful savings that give families more financial freedom. This year, it is estimated that 111 million households nationwide will save an average of $1,500, for a total of $176 billion.

      This is why Congress must now make these tax cuts permanent. I am, of course, concerned about the federal deficit. That is why I support the House budget plan, which would cut the deficit in half within four years. But we must first address the personal debts of American families. With an annual budget of approximately $2.5 trillion, Washington should tighten its own belt by cutting wasteful spending before asking the taxpayers to sacrifice more of their income.

      Yet making tax cuts permanent is only a first step. There are several thoughtful proposals now before Congress that would help brighten the financial outlook for all Americans.

      To encourage long-term savings and investments, I have co-sponsored legislation to increase the yearly maximum that can be put into Individual Retirement Accounts and 401(k) accounts.

      I have also co-sponsored a bill to reduce taxes on interest earned on savings in bank or credit union accounts. With more than 90 percent of today's retirees dependent on Social Security for critical financial support (compared to only 30 percent four decades ago), these proposals would give future retirees the ability to be more financially self-sufficient.

      I also endorsed the end of unfair double-taxation on dividend income. With more than half of all households owning stock today, some economists are predicting stock market gains of 10 percent to 20 percent if this double taxation is eliminated.

      But even with progressive proposals like those, the issue of personal financial management needs more than just the attention of Congress. Individuals, businesses and schools must all be part of the solution.

      A study released this month showed that U.S. high school seniors could correctly answer only half the questions they were asked about personal finance. Financial literacy programs should be a staple of school curriculum. Once students learn the power of saving and compound interest, they are likely to be much more enthusiastic about saving for their future.

      The same holds true for workers. While most employees are offered a variety of retirement plans, many are unsure which retirement plan is best for them. Businesses should help workers by offering - or requiring - educational programs on retirement, personal finance, insurance, saving, home-buying and paying for college.

      We are the most prosperous nation on Earth. By coordinating our efforts, allowing Americans to keep more of their earnings and drawing attention to the challenges of consumer debt and individual savings, we can help ensure that all citizens of this great country have the chance to enjoy the rewards for their years of hard work.

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