Despite the recent increase in the national savings rate, in the wake of the economic downturn, most Americans still save too little. When people receive a large lump sum payment in the form of a tax refund, it is one of their best opportunities to put some aside to build financial stability.
Our work promoting simple saving at tax time falls into several areas:
Refunds to Savings
We shed light on innovative policies that amend filing and refund processes allowing filers to split their refund into checking and savings, and to receive refunds as savings bonds. The potential of statewide legislation encouraging tax time saving is great- small, non-fiscal changes to tax filing procedures can, over time, stimulate saving. View AB 323, 2009's Tax Time College Savings bill. Past bills supported by New America include the 2006 Split Refunds Bill, which allowed simple, easy saving right on the tax form, and the following session's Refunds to Savings Act which allowed filers to purchase savings bonds with their refund.
Increasing Takeup of the Earned Income Tax Credit
We work with state and local partners to increase California's takeup of resources like the Earned Income Tax Credit. Our 2010 report Left on the Table examines the importance of the EITC to California's families and its local economies. Our focus on the EITC reflects its importance to California's working families- because the credit is the most effective federal anti-poverty program, lifting 5 million working families and their children out of poverty every year. The credit is also an important economic resource for the state- increasing the state EITC takeup creates savings, stimulates local economies, and creates jobs.
For more on local initiatives in this area, click here.
"If families are to be able to save and build up their asset base, they should be given the opportunity to connect the tax filing process to the savings process." - The Assets Agenda