Sen. William V. Roth Jr. (R-Del.) and Rep. W. Henson Moore (R-La.) yesterday introduced a tax reform proposal that would allow families to save up to $20,000 tax-free in new Super Savings Accounts.
The bill, which the two Republicans labeled the Broad-based Enhanced Savings Tax Act -- or the "BEST" tax act -- would be essentially revenue-neutral and would not change the relative tax burdens paid now by various income classes, they said.
The bill, which joins the Bradley-Gephardt "FAIR" tax proposal, the Kemp-Kasten "FAST" tax plan and other measures that would redesign the federal income tax system, would provide a more limited range of tax rates than exist now. The minimum tax rate would be 12 percent; the maximum would be 34 percent.
It would eliminate some existing tax breaks, including favorable tax treatment for capital gains income and the tax-free status of employer contributions to worker health insurance and life insurance, but would not change any feature of the corporate income tax.
It would index the personal exemption and income levels below which no taxes are owed and establish the Super Savings Accounts. A taxpayer would be allowed to contribute up to $10,000 a year tax-free, while couples filing jointly could contribute up to $20,000. Savings could be withdrawn for any purpose without penalty. Moore said that feature would encourage more savings by young people who might be discouraged from saving through Individual Retirement Accounts because of restrictions on the purposes for which money can be withdrawn without penalty.
The proposal would be phased in over five years.