Senator Ron Wyden Wants Children's Savings Accounts

“I want a tax code in America where everybody has a chance to get ahead, especially those don’t have much of a chance," said Senator Ron Wyden (D-OR), the incoming Chair of the Senate Finance Committee at a conference last Friday. That's a lovely sentiment, but how do you get there? Fortunately, Senator Wyden used his speech to USC's Gould School of Law and the Brookings-Urban Tax Policy Center to outline his vision for tax reform, and there's a great deal to like.

According to the Tax Policy Center's TaxVox blog, Senator Wyden outlined these principles:

• Narrow the gap between taxation of investment income and ordinary income.
• Significantly increase the standard deduction.
• Simplify and enhance the refundable Child Tax Credit and Earned Income Tax Credit.
• Revise savings incentives by creating a new investment account for all Americans at birth, shift savings subsidies from high-income taxpayers to low- and moderate-income households, and consolidate and simplify the current tangle of existing tax-preferred savings incentives.
• Enhance job training.
• Restore Build America Bonds—a short-lived idea that partially replaced tax-exempt state and local bonds with direct federal subsidies. He’d also seek ways to encourage business to funnel overseas earnings into domestic infrastructure investment.

That's an ambitious and promising agenda that recognizes that the tax code currently plays a role in worsening wealth inequality. Senator Wyden also sees children's savings accounts as a part of the plan to reduce inequality and poverty in America and promote greater economic mobility.

This is a long-standing policy goal of the asset building field, and the Asset Building Program has articulated our vision of a universal system of children's savings accounts through the ASPIRE Act, a proposal with a long and bi-partisan track record of support.

In our vision, all children get an account at birth. Each account is seeded with $500 but the accounts of children with low-income parents receive a supplemental contribution of up to $500 more. The money in the accounts grows tax free, like in a Roth IRA, but we know that saving is hard for struggling families, so the first $500 a low- or moderate-income family contributes is matched, dollar for dollar each year. The money in the account is intended to promote economic mobility, so you can't take the money out for just any reason, only for those moments that can serve to build a brighter future, post-secondary education, homeownership, and ultimately as a universal retirement savings account.

This idea is being implemented in different forms all over the country, the City of San Francisco runs the Kindergarten to College program which targets all Kindergartners in the City; Cuyahoga County, OH started a similar initiative last fall, and more examples are showing up across the country.

Senator Wyden's outline suggests that he wants to take these kinds of plans and build them into a national infrastructure as a means to jump starting a national culture of saving that promotes economic mobility. That's not just a lovely sentiment, that's a plan that can work.