DALLAS -- Restoring the tax deduction for individual retirement accounts and liberalizing withdrawal opportunities will help reverse the decline in homeownership and revitalize the nation's economy, says the chairman of the Senate Finance Committee.
Reviving the IRA deduction is a must, Sen. Lloyd M. Bentsen, D-Texas, said in a keynote speech to the Mortgage Bankers Association of America convention recently.
Besides allowing a tax deduction of up to $2,000 a year for IRA contributions, Mr. Bentsen proposes penalty-free withdrawals from IRAs to make a down payment on a home, pay for a catastrophic illness or finance a child's college education.
A boost for homeownership is needed now, Mr. Bentsen told an appreciative audience.
Homeownership rates declined in the 1980s for every age group except those over 60, the first full decade of falling homeownership since the 1930s and the Great Depression, Mr. Bentsen said.
His aim is to not only restore the IRA as an attractive savings method, but to broaden its scope so "it's not just for retirement."
"Americans understand the IRA," Mr. Bentsen said. "They like it. It works."
The IRA was tax deductible for nearly all wage earners until the Tax Reform Act of 1986 took effect. The law restricted IRA deductions for workers participating in other pension-accumulation plans such as 401(k)s.
The IRA deduction was eliminated altogether for single taxpayers earning more than $35,000 and couples earning $50,000 or more. A single person earning $25,000 or more and a married couple with income of $40,000 or more receive only a partial deduction.
IRAs accompanied by tax-deductible contributions prove they increase savings, something the nation sorely needs to do, Mr. Bentsen said.
The economy now, Mr. Bentsen said, is plagued by "too much debt,too little savings, not enough production and a banking crisis of astronomical proportions."
Mr. Bentsen said he has strong support in the Senate and the House for his IRA proposal and other tax measures to bolster the economy.
Earlier, Warren Lasko, association executive vice president, said mortgage bankers -- middlemen who match money with borrowers -- now arrange for more home loans than either thrifts or banks.
Mortgage bankers now have 38 percent of the home loan market, he said. Consolidation of the savings and loan industry helped boost the mortgage bankers to the top lending position.