Serrano Reintroduces Bill to Encourage Savings

Statement

Congressman José E. Serrano today introduced the "Financial Security Credit Act of 2015," legislation to encourage a higher household savings rate nationwide by incentivizing savings by low- and moderate-income earners at tax time.

"We must address what is a daily crisis for too many families- the lack of savings to meet short term and long-term financial needs," said Congressman Serrano. "Far too many Americans are living on the edge of financial disaster, and just the slightest emergency can tip them over the edge. This bill will help address these problems by incentivizing working families to save a portion of their tax refund, and to hopefully maintain that savings. If they are able to do so, then that the taxpayer will become eligible for a refundable tax credit of up to $500 directly deposited into their account. It has been proven to work in New York City, San Antonio, and elsewhere, and I believe it is time to expand upon this idea."

"Living paycheck to paycheck, without meaningful savings, is essentially the 'new normal' for most Americans," said Reid Cramer, director of the Asset Building Program at New America. "Our current approach of heavily subsidizing retirement savings for upper income Americans and ignoring other Americans and other needs is obviously not working. The Financial Security Credit would give striving families the option to build a personal savings firewall, invest in educational opportunity for their children, or save for retirement. We should trust ordinary, hard-working families to make the best choice for themselves. Representative Serrano deserves credit for promoting legislation that supports savings, responsible financial behavior, and greater economic opportunity."

"Nearly half of all Americans have too little accessible savings to subsist even at the poverty level for three months in the event of an emergency," said Andrea Levere, President of the Corporation for Enterprise Development. "With millions of families so near the brink of serious financial hardship, Representative Serrano's effort to boost emergency savings for low- and moderate-income Americans is of national importance."

More than 43% of American households lack the savings to cover basic living expenses for three months if a layoff or other emergency causes a loss of their income. Without such a safety net, during financial emergencies many families are forced to rely on bad options such as expensive credit cards and exploitative payday loans.

Under the legislation, if an individual is unbanked or does not have an eligible savings option, then they are provided with the opportunity to establish an account on their tax form. Individuals can contribute to any of a number of savings options, including: basic savings accounts, 529 College Savings Accounts, Coverdell Education Savings Accounts, qualified retirement plans like 401(k) and IRAs, certificates of deposit, and savings bonds.

This legislation builds on the successful SaveUSA program model, which was initiated in New York City, and has expanded to San Antonio, Tulsa, and Newark, NJ through the Social Innovation Fund. These programs show that tax-filers, despite low incomes, can and will save if they have the right incentive at the right moment. Despite having average incomes of less than $18,000, program participants in New York City were able to save an average of about $550. In New York City, about 76 percent of savers held their balance for the full year, and nearly 47 percent returned to save the following year.

"Building savings is crucial to developing financial stability and economic mobility," concluded Congressman Serrano. "This legislation builds upon the important work of the New America Foundation, the Corporation for Enterprise Development and others, who have shown that we must do more for working families to help them protect against emergency, and to build for the future. The Financial Security Credit Act will help families do just that. "

Source