Bill Overview
Title: Middle-Class Savings and Investment Act
Description: This bill provides tax incentives for savings and investment for middle-income taxpayers. Specifically, it (1) increases the current tax bracket for capital gains and dividends; (2) allows an exclusion from gross income for up to $300 of interest income received by a taxpayer; (3) increases the threshold for the net investment tax for married couples filing jointly to $400,000, adjusted for inflation (thus eliminating the tax effect known as the marriage penalty); and (4) increases the maximum contribution amount and the rate of the saver's tax credit. As an offset to the cost of these incentives, the bill extends through 2028 the limitation on the deduction for state and local taxes.
Sponsors: Sen. Grassley, Chuck [R-IA]
Target Audience
Population: Middle-Income Taxpayers in the U.S.
Estimated Size: 160000000
- The bill aims to support middle-income taxpayers, defined by the legislation as those primarily impacted by changes to capital gains, dividends, and net investment income taxes.
- In 2021, the U.S. middle class was estimated to include about 52 million families or approximately 160 million people, considering an average size of a household being roughly 3 people.
- Globally, the middle class is a larger and more diverse group, but given this bill specifically targets U.S. tax law, international impacts would be indirect.
Reasoning
- The tax incentives are primarily designed to benefit middle-income earners who have investable assets, implying that not all households within this income bracket may be equally impacted.
- The policy offsets could mean minimal or no net benefit for some, depending on their specific tax situations, especially if they reside in states with high state and local taxes.
- The benefits from this policy are more likely to accrue to households who have the capacity to invest and save, hence those nearing retirement or with funding dependents might feel its effects more keenly.
- Considering the budgetary limits, it is crucial to account for a roughly even distribution across different household types including those potentially unaffected to gauge a representative sample.
Simulated Interviews
Software Engineer (Austin, TX)
Age: 40 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 5.0 years
Commonness: 8/20
Statement of Opinion:
- The policy seems beneficial, especially the increase in saver's credit since I am trying to save more for my kids' college funds.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 7 | 6 |
| Year 10 | 7 | 6 |
| Year 20 | 7 | 6 |
Marketing Manager (San Francisco, CA)
Age: 55 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 3.0 years
Commonness: 9/20
Statement of Opinion:
- While I appreciate the tax incentives, the extended SALT deduction limitation offsets much potential benefit for me.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 6 | 6 |
| Year 5 | 6 | 5 |
| Year 10 | 5 | 5 |
| Year 20 | 5 | 5 |
Freelance Graphic Designer (Denver, CO)
Age: 30 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 0.0 years
Commonness: 12/20
Statement of Opinion:
- The policy doesn't seem to affect me much since I don't have significant investments.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 5 |
| Year 2 | 5 | 5 |
| Year 3 | 5 | 5 |
| Year 5 | 5 | 5 |
| Year 10 | 5 | 5 |
| Year 20 | 5 | 5 |
Nurse (Miami, FL)
Age: 45 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 10.0 years
Commonness: 10/20
Statement of Opinion:
- I think the policy will ease some financial stress, especially increasing the saver's credit.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 8 | 6 |
| Year 10 | 8 | 6 |
| Year 20 | 7 | 6 |
Retired (Tampa, FL)
Age: 62 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 15.0 years
Commonness: 6/20
Statement of Opinion:
- The increase in capital gains tax bracket is really helpful for someone in my situation.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 7 |
| Year 2 | 9 | 7 |
| Year 3 | 9 | 7 |
| Year 5 | 9 | 7 |
| Year 10 | 9 | 7 |
| Year 20 | 8 | 6 |
Accountant (New York, NY)
Age: 28 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 0.0 years
Commonness: 10/20
Statement of Opinion:
- I don't really see how this policy touches my current financial situation.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 5 |
| Year 2 | 5 | 5 |
| Year 3 | 5 | 5 |
| Year 5 | 5 | 5 |
| Year 10 | 5 | 5 |
| Year 20 | 5 | 5 |
Teacher (Chicago, IL)
Age: 37 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 10.0 years
Commonness: 7/20
Statement of Opinion:
- The tax incentives are a relief, particularly the increased saver's credit.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 8 | 6 |
| Year 10 | 8 | 6 |
| Year 20 | 7 | 6 |
Corporate Executive (Atlanta, GA)
Age: 50 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 5.0 years
Commonness: 5/20
Statement of Opinion:
- The policy somewhat helps with investment taxes but is limited by state tax deductions.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 6 | 6 |
| Year 10 | 6 | 6 |
| Year 20 | 6 | 5 |
Retired (Pittsburgh, PA)
Age: 65 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 0.0 years
Commonness: 8/20
Statement of Opinion:
- As a retiree with limited investments, this policy offers minimal advantage.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 6 | 6 |
| Year 5 | 6 | 6 |
| Year 10 | 6 | 6 |
| Year 20 | 6 | 6 |
Entrepreneur (Los Angeles, CA)
Age: 34 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 8.0 years
Commonness: 7/20
Statement of Opinion:
- The policy could provide more immediate tax relief through the interest exclusion, aiding my cash flow.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 8 | 7 |
| Year 10 | 7 | 7 |
| Year 20 | 7 | 7 |
Cost Estimates
Year 1: $750000000 (Low: $700000000, High: $800000000)
Year 2: $800000000 (Low: $750000000, High: $850000000)
Year 3: $850000000 (Low: $800000000, High: $900000000)
Year 5: $950000000 (Low: $900000000, High: $1000000000)
Year 10: $1100000000 (Low: $1000000000, High: $1200000000)
Year 100: $1900000000 (Low: $1800000000, High: $2000000000)
Key Considerations
- The balance between incentivizing savings and mitigating revenue loss due to tax exclusions and credits.
- Potential for regional economic differences given the varied impact of state and local tax deduction limits.
- Impact on federal revenue streams and the broader economy where capital gains thresholds are increased.