Guest blog: Building financial security at tax time, “The Financial Security Credit Act of 2013”
VITA and other free tax prep-sites have long been dedicated to promoting improved financial well-being for their clients. Beyond the value of direct service, one of the most important roles that free tax prep sites can play is by serving as partners in research projects examining the strength and viability of different strategies to boost the financial security of vulnerable American families.
Proof arrived last week when U.S. Representative Jose Serrano introduced H.R. 2917, the “Financial Security Credit Act of 2013.” As NCTC members know, saving money is an essential step in achieving financial security, but current policy rewards the wealthy for the saving they were going to do anyway, leaves out ordinary Americans, and contributes to growing wealth inequality. The Financial Security Credit directly addresses these issues by using the federal tax system to provide these families with the same kind of incentives that upper-income families have long enjoyed for saving. Eligible families would:
- Apply for the Financial Security Credit at tax time on their federal income tax form;
- Have the ability to divert a portion of their tax refund into the approved savings product of their choice, or;
- Open an approved savings product directly on the tax form, and;
- Receive a 50 cent match on every dollar of savings, up to $1,000 saved, held for at least eight months.
This legislation makes a powerful statement about what our tax policies should be about. Policy should promote savings, opportunity, and economic mobility for all Americans, not just those that have already made it.
Free tax preparation organizations played a key role in building the empirical case that this is an idea that should be advanced and considered by Congress. First articulated by the Asset Building Program in 2008, the concept got a big boost when New York City’s Department of Consumer Affairs Office of Financial Empowerment (OFE) designed and launched the $ave NYC pilot project with 15 New York-based VITA sites. That experience showed the possibility of this approach, eventually attracting enough support to launch the Save USA expansion with the support of the Social Innovation Fund through the City’s Center for Economic Opportunity, to bring the experiment to three additional cities (San Antonio, TX; Tulsa, OK, and; Newark, NJ) and more VITA sites. Save USA demonstrated that there’s an appetite for a proposal like the Financial Security Credit, that even very low-income individuals will participate, and that the savings makes a difference in their lives. That information was critical in attracting the support of Rep. Serrano and many of his co-sponsors.
The Financial Security Credit is step toward building a framework for savings, opportunity, and economic mobility for all Americans. Thanks are due to Rep. Serrano and his co-sponsors for taking this concept and turning it into legislation and thanks are due to the many VITA partners who helped to build the case that helped us arrive at this point. There’s still a long way to go. When Congress returns from its recess in September and debates changes to the nation’s tax code, these ideas need to be part of the debate. Thanks to VITA programs in New York and across the country, they will be.
By Justin King, Federal Policy Liaison for the Asset Building Program of the New America Foundation