House Republicans were set to introduce legislation Thursday that seeks to establish Roth IRA-like accounts for Americans that would encourage saving while allowing for financial flexibility.
The Universal Savings Account Act would allow account holders to save in a tax-advantaged account while unlocking access to their money before retirement, according to the Washington Examiner.
The measure reportedly is sponsored by Rep. Diana Harshbarger, R-Tenn., and Sen. Ted Cruz, R-Texas.
"Washington shouldn't be in the business of micromanaging how people use their own money," Harshbarger said in a statement to the Examiner. "This bill is a win for working families, a win for personal freedom, and a win for financial independence."
Under the bill, anyone 18 years of age or older who is a citizen or a permanent resident of the United States can open a universal savings account with an initial contribution of $10,000 in after-tax income. The limit goes up by $500 each year, until it reaches $25,000, according to the Examiner.
For couples filing jointly, the initial maximum contribution is $20,000. Account holders would not have to pay taxes on the income earned from interest, giving them more flexibility for unexpected expenses.
Regardless of income, anyone can open and contribute to a universal savings account up to the limit each year, which would allow them to avoid double taxation.
Several types of savings accounts that face only one layer of taxation are included in the current tax code, but many of them are limited in their purposes by government regulation.
"A simple and accessible incentive savings plan will provide families with a way to establish financial security and prosperity," Cruz said in a statement to the Examiner. "This bill provides a straightforward solution to those challenges. I strongly urge my colleagues to pass this bill for the future generations of Americans."
During the last session of Congress, Harshbarger introduced similar legislation, but it was not given a floor vote, despite having six other Republican co-sponsors.
The latest version of the bill reportedly allows parents to open custodial universal savings accounts for children and has no income limitations for eligibility.
According to the Examiner, the legislation allows the money to be invested in bonds and equities, and tax-free withdrawals are permitted at any time and for any reason.
Opponents of universal savings accounts say such tax-advantaged accounts favor those with high incomes who have the means to invest, while low-income earners do not stand to benefit from them.
Nicole Weatherholtz ✉
Nicole Weatherholtz, a Newsmax general assignment reporter covers news, politics, and culture. She is a National Newspaper Association award-winning journalist.
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