European Commission Endorses Market-based Policies to Boost Saving, Investment, and Economic Growth

One of the keys to economic growth is individual savings. When people set aside a portion of their earnings, they not only create a more secure future for themselves but also one for the nation as a whole. Individual savings create a pool of funds that businesses use to invest in the buildings and machines that make workers more productive and fuel wage growth. It also funds research and development of new products and services that improve lives.  

Unfortunately, government policies often suppress this virtuous cycle. Taxes on the returns to savings encourage consumption today rather than saving for tomorrow, suppressing wage growth. Similarly, elevated levels of government debt ‘crowd-out,’ or displace private investment. Rules and regulations can also distort capital markets leading to investment in activities that have low social benefit. 

Americans for Prosperity has long recognized these problems and champions market-based policies that mitigate them. During the major debates over tax policy that occurred both this year and in 2017, for example, AFP prioritized measures such as across-the-board rate reductions and tax-deferred accounts to boost saving. AFP also supported provisions such as equipment expensing and the immediate deduction of research and development expenses to create a more level playing field across sectors. 

The stifling effects of government on individual saving are not unique to the U.S. At the end of last month, the European Commission issued a report highlighting the broad societal benefits of individual savings and recommending a number of measures aimed at reforming government policies that discouraged it across the continent. Among other reforms, the commission encouraged member states to alter tax codes so that they did not inhibit savings as well as the creation of tax-advantaged savings accounts. It also recommended reforming rules and regulations that distort investment markets.  

While promoting these measures, President of the European Commission Ursula von der Leyen echoed AFP when she noted that these types of policies produce “a double win. Households will have more and safer opportunities in capital markets and increase their wealth. At the same time, businesses will have easier access to capital to innovate, grow and create good jobs in Europe.” 

Patrick Fleenor is a tax policy fellow at Americans for Prosperity.