January 30, 1990
TO: BOARD OF GOVERNORS NO. 7-90
FEDERAL LEGISLATION MEMBERS NO. 2-90
RE: ADMINISTRATION'S "SAVINGS AND ECONOMIC GROWTH ACT"
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Late today, Treasury Secretary Nicholas Brady announced the
details of the Administration's "savings and investment"
legislative proposal. Called the "Savings and Economic Growth
Act", the proposal contains three elements:
FAMILY SAVINGS ACCOUNT
Taxpayers can make non-deductible contributions of up to
$5000 ($2500 for each spouse) or $2500 for single taxpayers.
Contributions would be permitted for single filers with adjusted
gross income (AGI) of less than $60,000, for heads of households
with AGI less than $100,000, and for married taxpayers filing
joint returns with AGI less than $120,000. All earnings
accumulate tax-free and can be withdrawn tax-free after seven
years. Various penalties apply for early withdrawals. Qualified
investments would be the same as for IRAs. Contributions can be
made in addition to IRAs, 401(k)s, qualified pension plans and
other similar plans.
CAPITAL GAINS TAX RATE REDUCTION
Gains from all capital assets held by individuals (other
than collectibles) would qualify for an exclusion of 30% if held
for more than three years, 20% if held for more than two years
and 10% if held for more than one year.
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HOME OWNERSHIP INITIATIVE - IRA EARLY WITHDRAWAL
The Home Ownership Initiative waives the 10% excise tax
penalty for IRA early withdrawals if the money is used to
purchase a home that costs no more than 110% of the median price
of homes. The maximum amount that may be withdrawn is $10,000.
A copy of Secretary Brady's statement and a detailed
description of the proposal are attached. We will keep you
informed as this matter develops. Should you require further
information, please call at (202) 955-3544.
Julie Domenick Doerr
Vice President-Legislative Affairs