Amid Record Inflation, Young Joins Colleagues to Propose Middle Class Savings Protections
U.S. Senator Todd Young (R-Ind.) joined Senators Chuck Grassley (R-Iowa), John Barrasso (R-Wyo.), Steve Daines (R-Mont.), Bill Cassidy, M.D. (R-La.), and James Lankford (R-Okla.) to introduce legislation that would provide relief and protections for middle class savings that still face federal taxes despite significantly diminished value imposed by historic rates of inflation. The Middle-Class Savings and Investment Act would help lower- and middle-income Americans, their families, and retirees as inflation outpaces any interest earned or gains accrued by their savings through targeted tax relief.
“The policies of Washington Democrats have led to the highest price hikes in 40 years. This record-high inflation is hitting working families and those living on a fixed income the hardest. Our Middle-Class Savings and Investment Act offers targeted relief to Hoosiers who are struggling with the impact of inflation,” said Senator Young.
“The reckless spending, backwards energy policy and overall economic mismanagement of this administration has led to 40-year high inflation. Unlike other plans, like gas tax rebates or increased taxes on businesses, our legislation will not further fan the fires of inflation,” said Senator Grassley. “Middle class families, retirees, small businesses and farmers have watched as their savings erode in value while still facing taxes on gains that may not even keep pace with inflation. This creates a perverse incentive to spend now rather than save, further fueling inflation. Our bill will ensure that those hurting most from inflation aren’t further burdened by those taxes.”
The Middle-Class Savings and Investment Act would target relief for Americans by:
- Excluding a reasonable amount of interest income from being subject to tax ($600 for married couples, $300 for individuals);
- More than doubling the size of the zero percent (lowest) tax bracket for long-term capital gains and qualified dividends, and indexing the income thresholds to inflation;
- Eliminating the marriage penalty that exists in the current Net Investment Tax—which subjects some income to an additional 3.8 percent tax—and indexing its income threshold to inflation;
- Increasing the maximum ‘savers credit’ an individual may receive for contributing to qualified retirement accounts and expanding the availability of this credit to more taxpayers.
According to data released by the Bureau of Labor Statistics, the consumer price index (CPI) accelerated last month at the fastest rate in 40 years. The annualized CPI—a critical gauge of inflation—rose 8.6 percent for the twelve months ending in May. This massive increase in inflation amounts to a reduction in consumer purchasing power, squeezing budgets for individuals and families across the country.
Americans who want to save their hard-earned money for the long term have few options to preserve its value in such an environment. Where they can accrue interest or may incur some modest return, they still face federal taxes on those gains under current law. The Middle-Class Savings and Investment Act provides protections and targeted relief for these Americans.
“The Middle-class Savings and Investment Act provides important tax relief to American families to help them to save and invest in the economy. The bill expands the zero percent capital gains bracket, expands and indexes the threshold for the Obamacare 3.8 percent net investment income tax, and expands the Savers credit. Senator Grassley should be applauded for introducing this important, pro-taxpayer legislation,” said Grover Norquist, President of Americans for Tax Reform.
“Senator Grassley’s Middle-Class Savings and Investment Act would allow millions of American workers and families to invest more confidently for any number of major and long-term life expenses, and would reduce the taxes Americans owe on the earnings from those investments. The legislation is also fiscally responsible, paying for pro-growth tax cuts by extending the prudent $10,000 cap on the state and local tax (SALT) deduction for three years. NTU applauds Senator Grassley for his leadership, and we encourage Senators to support the Middle-Class Savings and Investment Act,” said Andrew Lautz, Director of Federal Policy, National Taxpayers Union.
“At a time when President Biden is calling for higher taxes and fueling inflation through misguided policies and out-of-control spending, the Middle-Class Savings and Investment Act would provide much needed tax relief to the middle-class. By reducing taxes on savings and investment, the bill would allow Americans to keep more of their hard-earned money and incentivize business investment. Americans for Prosperity applauds these changes, and would like to thank Senator Grassley for introducing this commonsense legislation,” said Gary Haglund, Senior Economic Policy Analyst, Americans for Prosperity.