California ranks second to last (ahead of New York) among US states in the percent of households who own their own homes (2005 ACS). Only 57% of Californian households are homeowners, compared to over 70% nationally. As Figure 1 illustrates, this current gap is representative of a persistent growing trend; as homeownership rates have risen nationally, California has failed to keep pace.
California should amend its state income tax forms to allow filers to purchase savings bonds -- for themselves or their children—with a portion of their refunds. By making it easier for Californians to save part of their hard-earned refunds, policymakers can help families build the personal safety nets they need to thrive in today’s economy. With this change, California would lead the nation in harnessing tax time savings to build families’ economic security.
What difference would it make if every Californian grew up knowing that she or he had a nest egg to go to college or buy a home? What benefits would accrue to individuals, families, and California as a whole? California can find out by creating California KIDS accounts.
To help un-banked Californians to open bank accounts and enter the financial mainstream, California policy makers should consider creating Banking Development Districts. New York State created these special districts to provide incentives to encourage banks to locate in communities that lack conventional financial institutions and offer enhanced products and services
Click here for a brief video discussion of this idea.
An American Stakeholder Account (ASA), established for every child at birth, would build a savings and ownership culture in America, promote financial literacy, and fortify the American economy for the long haul. Every child would automatically receive a $6,000 deposit into an ASA at birth -- and also… more
Federal housing programs are sustained more by inertia and the difficulty of unwinding financial obligations than by a consensus that these policies are effective in helping people. Established rationales have been weakened both by changes in the nature of the housing problems faced by low-income households and by the inability of research to demonstrate that these programs are as cost-effective as alternative means of helping improve the lives of the poor. Setting a new course requires us to… more
Achieving security in today’s economy requires not just a job and growing income, but increasingly on the ability to accumulate a wide range of assets. Yet many Americans have low asset holdings and many children are disadvantaged from the start of their lives relative to those children born into affluence. Regrettably, the asset-building system already in place that facilitates wealth creation disproportionately benefits those households with higher incomes, better job benefits, and larger income tax liabilities. Lower-income families are offered… more
For families making the difficult transition from welfare to work, developing assets is critical to achieving true economic independence. In order to prevent a complete backslide to public assistance, low income working families must begin to develop their own safety net through personal saving for use in the event of an unexpected income shock due to illness or temporary unemployment. As personal saving is essential to achieving self-sufficiency – the stated goal of our national welfare program – one would… more
States continue to play an important role in helping low- and moderate-resource families save and build wealth. They have been innovators in assets policy, whether on their own or through the forces of "devolution," in which federal funds and decision-making authority are shifting from the federal to the state level. These initiatives and experiments -- these "laboratories of democracy" -- have inspired and informed other states as well as policymakers at the national level.
Sorting through credit card offers, deciding how to invest retirement funds in the stock market, picking the right mortgage from a myriad of options, deciding how to save for a child's college tuition—the scope and diversity of the financial decisions a family has to make has grown exponentially. Former Federal Reserve Chair Alan Greenspan observed, "Today's financial world is highly complex when compared with that of a generation ago. Forty years ago, a simple understanding of how to maintain a… more
Savings bonds have always served multiple objectives: funding the U.S. government, democratizing national financing, and enabling families to save. Increasingly, that last goal has been ignored. A series of efficiency measures introduced in 2003 make these bonds less attractive and less accessible to savers. Public policy should go in the opposite direction: U.S. savings bonds should be reinvigorated to help low- and moderate-income (LMI) families build assets. More and more, those families’ saving needs are ignored by private-sector asset managers… more
The purpose of this issue brief is to summarize a federal public policy agenda to broaden savings and asset ownership opportunities for low- and moderate-income Americans. It reflects our latest and best thinking, and draws heavily on the work of many experts focusing on various facets of savings and asset-building policy. The menu includes calls for new structures and policies, as well as changes to existing tax systems, government programs and financial products.
We continue to share President Bush’s vision for… more
Qualified Tuition Plans, commonly called “529 plans” after the
applicable section of the federal tax code, were implemented in their
present form in 2001. These state-sponsored plans can help families
save for their children’s college education, or an adult can open an
account to use for their own post-secondary expenses. Under current
law, earnings and qualified withdrawals are exempt from federal income
tax liability. Because these tax incentives are scheduled to expire
after 2010, Congress intends to act to make these provisions permanent.
The second year of the Bush Administration’s second term is underway and the prospect of a large breakthrough for asset building policy appears remote at this time. The President’s second Inaugural Address, which highlighted the transformative potential of “ownership” and an “ownership society,” has given way to the political realities of budget deficits, international commitments, and uncertain electoral prospects.In this difficult political environment, a “dual track” strategy should be pursued: continuing to lay the foundation for larger, more… more
To encourage savings, California state income tax forms should be amended to allow households to split their tax refund and direct portions to up to three accounts. The income tax forms would need to be changed to include three "boxes," where tax filers could input account numbers to which they could direct parts of their refunds. Currently, there is only one "box," on the form, allowing tax filers to direct their refund to only one account. New research indicates this… more
In recognition of the challenges inherent in pursuing tax reform, President Bush established an advisory panel in January 2005 which was asked to develop options for reforming the tax code. The President’s Advisory Panel on Federal Tax Reform took its mandate seriously, and its final report, issued in November, includes a range of far reaching ideas and specific proposals worthy of public debate. A number of recommendations would affect fundamental decisions about how households choose to save or consume, and… more
In a recent speech, Federal Reserve Chair Alan Greenspan noted, “Today’s financial world is highly complex when compared with that of a generation ago. Forty years ago, a simple understanding of how to maintain a checking and savings account, at local banks and savings institutions may have been sufficient. Now, consumers must be able to differentiate between a wide range of financial products and services, and providers of those products and services.” While the population as a whole generally lacks… more
California has the opportunity to make 529 accounts more attractive to low- and moderate-income families by providing a match for savings they put towards a college education.
One of the most common myths in economic and poverty policy is that low and moderate-income people can’t or won’t develop financial assets. However, evidence from a wide variety of successful pilot projects from around the U.S. shows that, like wealthy families, low-income families can and do save when appropriate incentives and savings products are in place. Tactics like integrating savings tools into social support programs, providing financial education, matching savings, and even simple changes like allowing a savings check-off… more
