	Description of Tax Treatment

Several types of investments are preferentially treated under the individual income tax, including Individual Retirement Accounts (IRAs), pensions, capital gains, dividends, owner occupied housing, and life insurance policy earnings. IRAs resulted in a loss of $18.5 billion. There are other savings and investments that receive favorable treatment under the individual income tax. Dividends are also now eligible for lower tax rates. These tax benefits are significant as well. There has been considerable debate among economists about the effect of IRAs on savings. Although the dollar contribution ceilings and income limits on IRAs keep the provision from providing benefits to very high income individuals, IRAs do generally benefit well-off individuals who are more likely to save.
Several types of savings are eligible for beneficial treatment under the individual income tax, and Individual Retirement Accounts (IRAs) have received considerable attention. Pension savings are actually more important in terms of revenue loss. There are other investments that are treated favorably as well. The President has proposed in a succession of budgets to significantly expand IRAs. Effects of these provisions on savings are uncertain, and, despite dollar limits on contributions and income phase outs, IRAs tend to benefit higher income individuals.