Research at CFED
Federal Asset Budget
Rewarding the Rich, Missing the Middle and Penalizing the Poor
The nation has a just interest in insuring that every American has a reasonable opportunity to save, go to college, start a business, buy a home, and build an economic future for themselves and their families; indeed, this is the way the economy grows. It is not surprising then that the Federal government spends hundreds of billions of dollars a year to encourage individuals to build assets. Some of these policies are direct outlays in the federal budget, but the lion’s share of incentives are designed as tax expenditures, which receive relatively little scrutiny.
Upside Down: The $400 Billion Federal Asset Budget is CFED’s third report in its ongoing effort to track federal investments in asset building, and determine where the money goes and who benefits. It finds that in Financial Year 2009, $384 billion was spent to help Americans save and invest. The report also finds that our current policies – or at least the 90% that operate as tax expenditures – are regressive, invisible and unregulated, and as such are of little help to low- and moderate-income households trying to become more financially secure.
The study – produced in collaboration with the Annie E. Casey Foundation – finds that these asset-building policies are doing little to help working families who most need the financial cushion. They found:
- More than half the benefits went to the wealthiest 5% of taxpayers in fiscal year 2009, and largely missed the asset-poor majority in this country. The wealthiest Americans (those earning over $1 million annually) receive more than $95,000 in tax benefits while middle income families receive a few hundred dollars and poor families relying on public benefits actually face penalties for saving.
- Eight out of 10 of the wealthiest families saved approximately one-third of their household income in 2009, while a full one-third of low-income households earned too little to make ends meet, much less save for the future.
- About 80% of the value for mortgage and property tax deductions accrued to the top 20% of taxpayers. In fact, many homeowners don’t take the mortgage deduction because they do not earn enough income or incur enough of a tax liability to warrant itemizing their deductions.
This upside-down set of subsidies would have a perverse enough effect on its own, but it compounds wealth disparities that have reached their highest level in generations, and that dwarf the income disparities that we are more accustomed to reading about. At a time when the economic downturn has left many low- and middle-income families struggling to get by, we can ill afford a federal wealth building strategy that primarily helps those who are already wealthy.
Download a copy of Upside Down: The $400 Billion Federal Asset Budget.
Prior reports in CFED’s Federal Asset Budget Series: