Ways to spur savings

Thrift -- "a penny saved is a penny earned" -- may at one time have characterized habits in the United States. But unfortunately that is no longer the case as consumption-oriented Americans drop far behind Europeans and the Japanese in their rate of savings. That Yankee incentive to save needs to be restored if the US economy is to be pulled out of its doldrums.

By official Commerce Department measurements Americans during 1980 saved 5.7 percent of their disposable income, up from 5.2 percent in 1979. But that compares woefully to the West Germans, for example, who have been salting away about 15 percent of their income in recent years; the Japanese, 26 percent; The British, about 14 percent; Canadians, about 14 percent.

Although "official" figures may understate the rate of US savings when gains realized in housing, or from the underground economy, are taken into account, the overwhelming evidence suggests that for most Americans not enough is going into piggy-banks as opposed to purchases. Yet savings are the lubricants of industrial expansion --providing the capital needed to finance new firms, boost job creation, and add new products and services. This is why stimulating savings is one of the paramount goals of the Reagan administration.

The White House in great part bases its three-year tax cut proposal on the assumption that Americans will save -- and by doing so, boost productivity. Indeed, for upper-income Americans such cuts will likely have that effect, as the experience of tax cuts in the early 1960s suggests.

But there is real question about the impact of the cuts for the majority of Americans. The reductions for the bottom strata of taxpayers will be modest and will likely be used for current purchases. For most middle-class families the cuts will barely offset higher social security taxes mandated in the next few years. Moreover, the current economic environment, including double-digit inflation, is quite different from that of the early 1960s, when 2 to 4 percent inflation was considered unacceptable. The incentive for many families to "buy now," before an item has shot up in price, will remain so long as the inflation rate remains high.

The administration is therefore correct in reckoning that the most important goal for encouraging savings is to take the appropriate steps -- such as budget cuts and regulatory reform -- to help slash the inflation rate. But more must be done.

Fortunately, a number of innovative suggestions have been made. Among them:

* Expand the interest-dividend tax exclusion. The current combined exclusion for tax years 1981 and 1982 (that is, returns filed in 1982 and 1983), is $200 for individuals and $400 for joint returns. Legislation before Congress introduced by Senator Lloyd Bentsen (who was responsible for winning the current exclusion) would expand those amounts to $1,000 for individuals, $2,000 on joint returns. A number of other bills, though differing in dollar amounts, would do the same thing.

A strong case can be made that any loss in taxes to the Treasury from such an enlarged exclusion would be offset by the renewed business -- particularly, housing -- activity resulting from investment of the savings dollars.

* Provide tax exclusions for interest earned on passbook savings accounts earmarked for home purchases.Many nations do precisely that, benefiting not only the individual saver but savings institutions and the housing industry. It need hardly be added that both these industries in the US -- now ailing --could use such a financial boost.

American housing officials note, for example, the success of the French "contract savings plan." If a French family agrees to save a certain amount over a specified period of time, the financial institution agrees to make a home mortgage loan at the end of that period. The saving interest is tax-free, and the government pays the saver a premium, which also is tax-free.

Nor is France alone in this approach. Britain, for example, provides tax deductions for first-time homeowners as well as special tax savings on accounts earmarked for specific approved purposes.

* Offer tax breaks for direct investment in industries by small savers. Under the French "Loi Monory," for example, individuals are given special tax reductions on savings invested in businesses. Over 400,000 individuals have participated in the tax-break plan since it was put into effect in the late 1970 s.

In addition, numerous other alternatives could be examined by lawmakers, such as reducing capital gains tax rates even further; encouraging workers to take a portion of stock from their firms in lieu of salary; increasing interest rates on US savings bonds; and ending the current tax discrimination on married couples, the effect of which is to discourage a spouse from working (from which savings income comes for many families.)

The above are just some proposals that the new Reagan team and lawmakers should consider in seeking to restore the once-heralded sense of American thrift. Significantly, the American people themselves seem eager to restore financial soundness to their personal and governmental affairs. Now is the ti me to cash in on this mood.