Tax reform which encourages savings and investment can be an important tool to ensure that retiring Americans have sufficient personal savings to maintain their current standard of living. Increased personal savings and investment are also good for the nation's fiscal well-being. The money financial institutions lend or invest does not grow on trees. This capital comes from the funds everyday Americans deposit or invest in these institutions. Thus, savings are important because they are a key element of capital formation.
Capital formation is necessary for economic growth and rising wages.
We must increase the savings rate if we wish to continue our current economic expansion. Without savings, it is impossible to build factories, purchase equipment, conduct research, or develop technology. Savings allow businesses to purchase equipment, and new equipment allows factories to be more productive, which in turn raises the income of workers and owners. This link between savings rates and capital formation is not rocket science. Workers are more productive when they are working with modern equipment.