Federal Policy Agenda

Congress should reauthorize the Assets for Independence program (AFI) and improve the effectiveness of the program.  Practitioner recommended changes include raising the authorization limit, lowering the non-federal match rate, expanding financial education investments, expanding eligibility standards and implementing technical changes around investment guidance, household definition, etc. AFIA has provided funding to 60,000 IDAs savers across the country. President Obama included $24 million for AFI in his budget request. Congress should fully fund the AFI program at $25 million.

• $10 Million for the Office of Refugee Resettlement’s discretionary grant program to provide IDAs to 20,000 refugee families to integrate them within the financial system.

• $5 million for the Beginning Farmer and Rancher IDA program (BFRIDA) which was authorized in the 2008”Farm Bill” to provide savings incentives and financial education to 4,000 agricultural entrepreneurs. President Obama included $5 million for BFRIDA in his FY 2010 budget request. Congress should appropriate funding at the full $5 million level.

The Savings for Working Families Act (SWFA) (S.985/H.R. 2277) provides a tax credit to financial institutions that match the savings (dollar-for-dollar up to $2,000 over four years) of at least 2.7 million low-income families who are saving to purchase a home, start a business or go to college. SWFA includes a small business component, a role for nonprofits and $120 million in funding for financial education for savers. 

Congress should enact a universal, progressive children’s savings account program providing an initial deposit for all newborns and matching deposits for low- and moderate-income children for education, home-ownership, retirement and entrepreneurship.  Congress should also permit adults to use a portion of their Roth IRA allocation to open accounts for youth.

Extend payroll-based retirement saving opportunities to a majority of the 75 million employees currently without access to a retirement plan.  Employers who do not sponsor a retirement plan would facilitate direct-deposit payroll deductions to an IRA and receive temporary tax credits to offset administrative costs.  The law could affect all employers in business for more than two years and with more than ten employees. 

Provide a 50% match to households earning less than $65,000 who save up to $1,000 in a retirement or 529 College Savings Account, Coverdell or qualified IDA.  The Act would also make the credit refundable, automatically deposit the credit into a designated retirement savings account using IRS Form 8888 and index the contribution amounts to inflation.

Individual Retirement Accounts -- and to a lesser extent 401(k)s, 457s, and 403(b)s -- have uses extending beyond retirement: IRA funds can be used without penalty to support college education and up to $10,000 can be used for first-time home-ownership; such uses are only available as loans from 401(k)s.  The law should align homeownership and education uses by applying IRA rules to 401(k)s and other employer provided accounts. The $10,000 lifetime limit for homeownership withdrawals should be doubled to enable families to build adequate capital for downpayment

Asset tests, used to determine a family’s means to support itself, discourage families from saving and adequately preparing for their future by deeming a family ineligible or forcing them to “spend down” their retirement or education savings in order to receive assistance.  Assets tests in their current form are counter intuitive to the very objective and mission of government assistance programs—providing temporary assistance that enables a family to move to financial self-reliance.  Congress should eliminate the asset limits from the Temporary Assistance for Needy Families (TANF) program and grant states the authority to set asset limits for the Supplemental Security Income (SSI) program. 

The Section 8 Voucher Reform Act of 2008 (SEVRA) presents a critical opportunity to increase the number of families being served by the HUD Family Self‐Sufficiency (FSS) program. FSS assists nearly 70,000 low‐income families who participate in the Housing Choice Voucher (Section 8) program or who reside in public housing. Families receive case management to gain employment coupled with asset accumulation to achieve independence. However, funding instability continues to threaten expansion of the program. SEVRA addresses this problem by making an important change in the way fees for FSS program coordinators are distributed, thereby stabilizing the program’s funding stream.

Full reporting (positive and negative payment data) of utility and telecom payments to consumer reporting agencies could raise the credit score of approximately 54 million of Americans.  Higher credit scores based on the reporting of timely payments, instead of the current practice of only reporting late payments, can move many African American, Latino, and young people into a prime rate credit score.  Utility and telecom payments are similar to credit, predictive, able to reported easily and help consumers.  Many utility firms’
counsels discourage full payment reporting due to concern that this is prohibited by The Telecom Act of 1996 (PL: 104-104); affirmative permission should be permitted.

Promote the purchase of U.S. Savings Bonds at tax time.  Congress should work with the Internal Revenue Service (IRS) to allow individuals to purchase Savings Bonds directly on their tax form when they file.  Congress should require the IRS to notify individual tax filers of their options to save and invest at tax time, including purchasing savings bonds.

Since nearly all enterprises start out as unincorporated entities and initially report business income using standard individual Form 1040 Schedule C, these forms can be used to craft precise tax credit or deductions which would assist new businesses’ with start-up costs while also stabilizing the business tax experience for first-time filers.  These reforms are likely to encourage higher rates of tax compliance in earlier phases of the business development process, resulting in more timely collection of both income tax revenues and Social Security and Medicare payments.