Savings and Families

by Ramesh Ponnuru

Over at the Journal, Amity Shlaes and Chris Edwards argue for expanding IRAs. It’s a good idea that they oversell.

It runs up against the same limit as Mitt Romney’s campaign proposal to exempt households making less than $200,000 a year from paying capital-gains taxes. I’d like to zero out those taxes altogether. But that proposal would not have done much either for savings and investment or for middle-class families, because most saving and investment is done by people with a lot of money to save and invest. Similarly, expanding IRAs is not going to make middle-class families much better off, especially since they already have access to other savings vehicles with the same tax treatment. It’s not going to amount to the same kind of tax relief that a large child credit would give them. And, of course, the expanded IRAs would do nothing to rectify the federal government’s bias against raising kids.

But it’s still a good idea, and one that could be combined with more substantial tax relief for families.

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