New NCTC Paper: Building Families’ Long-Term Financial Security
NCTC recently released its latest paper, “Building Long-Term Financial Security,” presenting a brief, lay-of-the-land description of savings policy as it connects to tax time and VITA programs. For the past decade, the Saver’s Credit has been a primary incentive policy for encouraging savings – more precisely, retirement savings – among low- and moderate-income taxpayers through the tax code. Meanwhile, over the same period, this credit has shown little effect on actually increasing the number of lower-income families with long-term savings.
Recognizing this, several research projects undertook efforts to promote the Saver’s Credit and retirement savings at VITA sites. What we’ve learned from these projects so far is that the Saver’s Credit isn’t necessarily moving the needle on increasing the financial security of these households, and focusing on retirement savings alone may be missing the mark.
In order to truly meet the asset-building needs of VITA clients in particular, and low- and moderate-income families generally, new policy alternatives must be introduced. This paper explores several past efforts to introduce such policies. All the discussed policies build off the recognition that stabilizing the short-term savings needs of VITA clients should come first, before longer-term considerations enter the realm of possibility.
A new policy alternative is now being introduced by the New America Foundation that could resolve the flaws in our tax code’s current savings policies while also building new opportunities for lower-income families to save at tax time. The Financial Security Credit would allow low- and moderate-income taxpayers to tap into their tax refunds, contribute to their savings through a variety of restricted savings products – including U.S. Savings Bonds, IRAs, and college-savings 529 plans, among others – right on their tax returns, and earn a matched incentive for their contributions. This incentive would then be directly deposited back into their accounts. This proposed credit would greatly expand the options available to VITA programs to assist our low- and moderate-income clients to save for a more secure future at tax time.
To learn more about the findings of this paper and the details of the proposed Financial Security Credit, please join us for a webinar on Thursday, September 27, 2012 at 3:00PM EDT. If you are unable to join this webinar, a recording of the presentation soon will be made available on our website along with our paper.
By Holden Weisman, Policy Analyst