The savings infrastructure supported by our existing tax expenditures is far too dependent on blind luck to justifiably be the recipient of so many tax dollars. For instance, success in retirement savings depends in part on whether your employer offers a plan, whether your employer chooses to match contributions in a low-fee plan and whether you’re able to stay with such an employer for a substantial period of time. Most of us just aren’t that lucky. According to the National Institute on Retirement Security, 45 percent of working-age households have no retirement account assets at all, let alone employers that generously match savings contributions.
Consider another proposal: a universal 401(k). This policy would ensure that everyone has a place to save for their long-term needs. In this economy, it would provide a stable way for a young worker who changes jobs frequently to save for retirement, without relying solely on good fortune or the good intentions of his or her employers.
By throwing out inefficient incentives that provide needless windfalls to the wealthy for merely going about their daily routines, the Senate Finance Committee is opening the door to these effective and common-sense policies. Saving and developing a nest egg is a shared American goal. If we are creating a tax code from scratch, let’s establish rules that help us achieve it.
Reid Cramer is director of the Asset Building Program at the New America Foundation, a nonpartisan public policy institute based in Washington, D.C.