Earlier this month. S. 2320, the “Universal Savings Account Act (USA Account) was introduced by Senator Jeff Flake (R-Ariz.). This legislation creates a new tax-advantaged savings account that can be used for expenditures of any kind. Not only will this encourage households to save more of their hard-earned income, it will help curb the existing bias in the tax code toward double taxation of income. ATR supports this important, pro-taxpayer legislation and urges all Senators to co-sponsor and support this bill.
Currently, there are about 15 tax-advantaged savings accounts that taxpayers can use to save for retirement, healthcare, and education. When used correctly, these saving accounts drastically reduce the tax burden on individuals and families.
There is just one problem – the current system is so complex that it causes most Americans to under-save. Taxpayers have too many options, which encourages them to make the wrong choice – do nothing and instead consume what could have been saved.
USA Accounts will help solve this problem by introducing a new tax advantaged savings account that does not have the same restrictions of existing accounts. Anyone over the age of 18 can open this new account and contribute up to $5,500 in after tax earnings each year. They are then free to withdraw these funds for any reason, at any time, tax-free.
Similar accounts already exist in Canada and the United Kingdom, and are extremely popular for good reason – they are easy to set up and maintain and they empower individuals to make their own choices without arbitrary and at times confusing limitations.
While the existing network of tax preferred savings accounts help Americans meet education, healthcare, and retirement expenses, the reality is they can be too complex and confusing for many families. By introducing a simple, streamlined saving account available for any expenditure, Americans will save more, be taxed less, and be able to better manage their finances. ATR supports this commonsense legislation and urges all Senators to support USA Accounts.