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1 Will McBride, et al., Simplifying Saving and Improving Financial Security through Universal Savings Accounts 1 (2024)

handle is hein.taxfoundation/smysvgadi0001 and id is 1 raw text is: TAX FOUNDATION Simplifying Saving and Improving Financial Security through Universal Savings Accounts Will McBride Vice President of Federal Tax Policy & Stephen J. Entin Fellow in Economics Huaqun Li Senior Economist Garrett Watson Senior Policy Analyst, Modeling Manager Alex Durante Economist May 2024 Key Findings • Since the 1970s, saving policy in the U.S. has primarily revolved around boosting retirement saving and other narrowly defined categories of saving, such as for health care and education, through com- plex rules and limitations that primarily benefit high-income earners. • The approach leaves many categories of saving at a disadvantage and subject to double taxation through the income tax, such as saving for emergencies, buying a home, starting a family or a busi- ness, or any of the other reasons people choose to save for the future. • Other countries, such as Canada and the UK, have found a simpler solution that is more widely avail- able and useful, boosting savings and financial security for households across the income scale. Uni- versal savings accounts (USAs) are tax-advantaged savings vehicles with unrestricted use of funds, allowing participants to save for any reason without penalty or excessive paperwork. • We simulate a Canada-style USA in the U.S., paid for by removing the tax advantages of health savings accounts (HSAs). We find this reform would be fiscally responsible, reducing deficits in the short run, while simplifying the tax code, reducing compliance costs, shifting the benefits toward low- and mid- dle-income households, and boosting financial security for these households over the long run. The Tax Foundation is the world's leading nonpartisan tax policy 501 (c)(3) nonprofit. For over 80 years, our mission has remained the same: to improve lives through tax policies that lead to greater economic growth and opportunity. TAX FOUNDATION 1325 G STREET, NW, SUITE 950, WASHINGTON, DC 20005 202-464-6200 1 laxfoundation.org