A Bipartisan Plan to Help Low-Wage Workers Save for a Rainy Day
Earlier today, Senator Cory Booker (D-NJ) and Senator Jerry Moran (R-KS) announced a plan to give workers the option to increase the amount of their Earned Income Tax Credit (EITC) and other tax refunds by putting a portion of the payment into savings.
The Refund to Rainy Day Savings Act seeks to expand year-round financial security for millions of Americans by allowing them to defer 20 percent of their tax refund into a Treasury-held savings account that would collect interest over six months and be returned to the taxpayer at a higher amount. This program would be available to the more than 80 percent of Americans who receive a tax refund each year, but could be especially effective for those with low wages who use their entire refund to pay off debt and are left with little or no emergency savings after tax season.
Credit: CFED
According to the Corporation for Enterprise Development (CFED), one in every three Americans has no financial savings at all, and nearly half of all Americans are considered “liquid asset poor,” meaning they lack enough savings to handle an unexpected emergency like a car accident or a lost job.
The legislation also establishes a three-year pilot expansion of the existing Assets for Independence program to evaluate the impact of growing locally-based savings incentives for lower-income workers without increasing federal funding. To read more about the Refund to Rainy Day Savings Act, click here.