HAVING WASTED well over a billion dollars in tax revenues on the misnamed All Savers certificate, the Treasury concludes that this tax dodge should not be continued. Secretary Donald T. Regan has arrived at the view that "it has not served the purpose it was designed to do." He is a bit late in coming to that opinion. But better late than never.
Nothing has happened since the law was passed last summer that was not clearly predictable at the time. The purpose, you will recall, was to rescue the savings and loans by enabling them to attract deposits at below-market interest rates through a temporary tax exemption. Never mind that the exemption never benefitted all savers, but only people in the upper income brackets.
Its most enthusiastic proponent, the U.S. League of Savings Associations, originally claimed that sales of the certificates would reach $230 billion in the 15- month life of the exemption. The Treasury, more guarded in its optimism, estimated that the total might be $120 billion. In fact, sales through January totalled $45.4 billion, most of it in that first surge last October, and are now down to a trickle.
Opponents pointed out that much of this tax subsidy would inevitably go to the commercial banks, which hardly need it. As it turns out, the commercial banks got a fat 43 percent of it. It also appears that the certificates attracted very little new money. In perhaps three-fourths of the cases, people bought the certificates with money drawn out of other savings accounts.
What lessons should you draw from this fiasco? Only the obvious ones. First, it's another demonstration of the truth that an industry's Washington lobby may not be the best guide in remedying that industry's troubles. Where businesses are divided and frightened, their trade association is in no position to lead the way to sweet reason. It is only too likely to embrace the first flashy idea that promises at least not to exacerbate the quarrels among its members. The second lesson is that, despite all the talk about stringency, Congress still tends toward expensive tax benefits for troubled industries--even when everyone knows that they are futile. It's a traditional way of expressing sympathy--the congressional equivalent of sending flowers.
That's worth keeping in mind as you hear the shrieks and groans of the S&L lobby. Their industry is rapidly vanishing, a victim of inflation and rapid evolution in financial institutions. Congress can't stop the process. It can only waste more public dollars if it tries. The billion-plus dollars already wasted constitute a sufficient token of regret.