A Contract With America's Investors

An estimated 80 million Americans are investors. Even families not directly invested in the Stock Market are affected by it, since most major U.S. companies are traded on the Stock Exchange and their fiscal health steers the direction of the American economy. Millions of American workers also participate in 401(k) or other retirement plans which invest in stocks or mutual funds.

Many American families are now reluctant to return to investing. This is understandable in the wake of September 11, wrongdoing by some corporate CEOs, and uncertainty about the next step in the war against terror.

More fundamentally, a lot of our laws discourage savings and investment. This must change. It is critical that we help American families renew their faith in investments, or economic recovery will be jeopardized. America's investors, large and small, are the engines of American economic growth. To remedy this, I propose a "Contract with Investors," designed to help families invest and also grow their savings in the future. Here are some of the features of my plan, which I introduced in the Senate last week:

Increasing savings opportunities: We need to help families prepare for retirement. Congress should increase the amount individuals could annually contribute to Individual Retirement Accounts and 401(k) plans. Under this plan, IRA limits would rise from $3,000 to $5,000 per year, while 401(k) plan contributions would increase from $11,000 to $15,000.

Americans are living longer. Many elderly citizens would prefer to continue to keep their money in retirement savings accounts a little longer than current law, which requires minimum annual withdrawals once investors reach the age of 70.5. My bill would delay this rule until people reach the age of 75, giving them the option of waiting a few more years to watch their savings grow.

Making tax cuts permanent: A strong bipartisan majority of Congress voted to reduce taxes for American families in 2001. President Bush's tax relief plan has won support from many economists, including Federal Reserve Chairman Alan Greenspan. But due to a Senate budget rule at the time the plan was debated in Congress, these tax cuts go away in 2011.

We need to make them permanent, so families will not have to worry about a sharp tax increase that will be imposed when the cuts expire. Additionally, making tax cuts permanent will help businesses, which currently have difficulty making investment plans without knowing whether the tax code will revert to old tax levels.

Making permanent repeal of the federal death tax, in particular, has been one of my top priorities. This terribly unfair tax penalizes small-business owners, farmers, and ranchers who worked and paid taxes all their lives to build something to give to their kids and grandkids. It simply is un-American for the government to dun these entrepreneurs again when they die - causing many families to sell land or property just to avoid bankruptcy.

Yet under current law, the death tax is resurrected in 2011 (at 2001 tax rates). This adds significant complexity to future death tax planning, increasing wasteful costs that are a drag on our productivity. My plan accelerates repeal and makes that repeal permanent by 2005.

Accelerating marginal reductions: Such reductions benefit all taxpayers and their families by allowing them to keep more of their own money. I propose speeding up the reductions by moving tax cuts scheduled for 2004 to 2003, and those scheduled for 2006 to 2004.

This acceleration will also help small businesses that are sole proprietorships. Under current law, they pay the highest individual marginal income tax rate, which is more than what big corporations have to pay. It's not only unfair, it impedes small-business growth. Under my bill, starting in 2004, these business owners would pay the same rate paid by big corporations (35 percent).

Other reforms I propose would help investors more directly. Reducing the capital gains tax to 10 percent, for example, would stimulate new investment and more productive use of capital. And eliminating the double taxation of corporate dividends will produce higher returns on dividend-yielding investments. Companies also will gain an incentive to make money and give it to shareholders to increase the value of the stock.

Taking these steps will benefit families' futures and boost the economy overall. I am hopeful that members of both parties will be able to work together on these reforms once the 108th Congress convenes in January.

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