For many Americans, April 15 is a reminder that those crafting tax laws in Washington seem to be in a different world. Yet, the United States creates some of our most important social policy through the tax code.
This country has transformed middle class opportunity by offering important tax subsidies that make homeownership and college more affordable. In addition, for families earning below $50,000, the refundable Earned Income Tax Credit provides an average tax refund of about $2,800 and has become the country’s most effective family income support. It has given working families a lifeline and encouraged large numbers of single parents to leave the welfare system for work.
However, the country has unfinished business when it comes to designing a tax code that effectively promotes wealth creation and financial security among the vast majority of Americans. One of the most important pillars of wealth and financial security for the 99% is held in retirement wealth through pensions, 401(k)s and IRAS. And still over 75 million Americans are not participating in the retirement savings plans at their place of work. In fact, the majority of low- and middle-income workers have effectively no tax incentives to save for retirement, even when they have an account.
Tax Day may mean something more positive to more Americans if the tax reform discussions currently underway within the House Ways and Means Committee take seriously the advice of an unusually broad array of voices from low-income advocates to financial industry experts. The Aspen Institute Initiative on Financial Security has added its voice to the request for comments from the committee’s Working Group on Tax Reform.
The Institute joins the bipartisan consensus that the balance sheets of both the individual household and the nation need to be stronger, and that improving how Americans save, invest and own is the key. Both new retirement accounts and new methods to build savings can be enacted in the tax code. The moment has never been riper.
The current momentum behind tax reform offers an opportunity to move forward the bipartisan plan, endorsed in the Obama budget, to establish automatic IRAs for the millions left out of the system. Average Americans would benefit even more from a reform of the current Saver’s Credit. If individuals received a $1 credit for every $2 deposited into their 401(k) or IRA , it would boost national savings and turbo charge the nest eggs of millions of Americans. Promoting the financial security that comes from savings and wealth is a worthy goal for a reformed tax code that asks for sacrifice and provides reward for all.
This editorial also ran on The Huffington Post.