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The Inclusive Economy

An Asset Advocate’s Guide to the Exciting World of Tax Reform

By Ezra Levin on 10/22/2014 @ 02:00 PM

Tags: Education, Federal Policy, Housing and Homeownership

Last month, CFED released its report on wealth inequality and the upside-down tax code. In case 45 pages of tax policy analysis doesn’t excite you as much as it does me, I want to point you to our 3-page Federal Policy Brief, which summarizes the key points from that report. We want this guide to be useful to advocates on the ground, because reforming these asset-building tax programs is an enormous opportunity for the asset-building field.

If you’re an advocate who works on housing for low-income communities, how many times have you heard from policymakers that there’s just not enough money to expand this lending program or that down payment assistance program? Well, the federal government is spending nearly $100 billion on just two homeownership tax programs every year—and the low- and moderate-income clients and communities you serve are getting little or no support.

Or maybe you work on higher education? Or retirement security? Or savings and financial security more broadly? The story is the same for your issues too. All told, the federal government spent $542 billion last year on asset-building tax programs. The vast majority of this spending goes to those at the very top of the income spectrum.

It’s worth pausing on that number for a minute: $542 billion. When you think of the big “welfare” programs, what do you think of? Medicaid? About $265 billion last year. Food Stamps (SNAP)? That cost $76 billion. Section 8 vouchers? $18 billion. TANF? $17 billion. Bottom line: traditional social service spending pales in comparison to spending on asset-building tax programs.

If the thought of tax policy makes your eyes glaze over, don’t think of it as tax policy. Think of it as asset-building policy, because that’s what it is. The way the federal government boost assets is, as a rule, not through grant programs like Assets for Independence (AFI), which cost about $19 million last year. Laudable though these asset-building grant programs are, they are microscopic in comparison to asset-building tax programs. Multiply AFI by 28,000 and you approach what we spend on asset-building tax programs. In short, when the federal government wants to boost assets for Americans, it does so through the tax code; and it does so primarily for the wealthiest Americans. That’s Upside Down.

So if you’re looking for big federal policy reforms to get more low- and moderate-income folks into homes, look at making the tax programs more equitable. If you want to get more students into higher education, check the tax programs. If you want to expand retirement security, reform the tax programs. Or if you simply want to expand savings and wealth more broadly for low- and moderate-income Americans, take a look at the tax programs. That’s what this Federal Policy Brief and the full report do. The asset-building programs and funding are there, but they’re just not serving the families and communities who need it the most. Let’s change that.

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