The Case for Universal Savings Accounts

Key Findings Personal saving and investment are necessary for long-term economic growth. Though the tax code provides several types of accounts that receive proper tax treatment for narrow saving purposes, their elaborate rules and restrictions complicate and discourage saving. The creation of universal savings accounts (USAs) would help people to save. USAs are all-purpose accounts available to anyone, with no minimum contribution requirements and no restrictions or penalties for withdrawals. They apply the proper tax treatment to saving, as they have only one level of taxation, at the time of either contribution or withdrawal. USA equivalents have been implemented in Canada and the United Kingdom, where they have encouraged saving and seen widespread usage across income groups. For policymakers in the United States designing USAs, details would include setting an annual contribution cap, adjusting contribution limits over time, and choosing between traditional- and Roth-style…

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