[Congressional Record Volume 151, Number 53 (Wednesday, April 27, 2005)]
[Senate]
[Pages S4417-S4418]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. SANTORUM (for himself and Mr. Lieberman):
  S. 922. A bill to establish and provide for the treatment of 
Individual Development Accounts, and for other purposes; to the 
Committee on Finance.
  Mr. SANTORUM. Mr. President, I along with Senator Lieberman am 
introducing the Savings and Working Families Act of 2005.
  The need for this legislation comes at a time when Americans face an 
ongoing savings and assets crisis. One third of all Americans have no 
assets available for investment, and another fifth have only negligible 
assets. The United States household savings rate lags far behind that 
of other industrial nations, constraining national economic growth and 
keeping many Americans from entering the economic mainstream by buying 
a house, obtaining an adequate education, or starting a business.
  Low-income Americans face a huge hurdle when trying to save. 
Individual Development Accounts, IDAs, provide them with a way to work 
toward building assets while instilling the practice of savings into 
their everyday lives. IDAs are one of the most promising tools that 
enable low-income and low-wealth American families to save, build 
assets, and enter the financial mainstream. Based on the idea that all 
Americans should have access, through the tax code or through direct 
expenditures, to the structures that subsidize homeownership and 
retirement savings of wealthier families, IDAs encourage savings 
efforts among the poor by offering them a one-to-one match for their 
own deposits. IDAs reward the monthly savings of working-poor families 
who are trying to buy their first home, pay for post-secondary 
education, or start a small business. These matched savings accounts 
are similar to 401(k) plans and other matched savings accounts, but can 
serve a broad range of purposes.
  The Savings and Working Families Act of 2005 builds on existing IDA 
programs by creating tax credit incentives for an additional 900,000 
accounts. Individuals between 18 and 60 who are not dependents or 
students and meet the income requirements would be eligible to 
establish and contribute to an IDA. For single filers, the income limit 
would be $20,000 in modified aggregate gross income, AGI. The 
corresponding thresholds for head-of-household and joint filers would 
be $30,000 and $40,000, respectively.
  Participants could generally withdraw their contributions and 
matching funds for qualified purposes, which include certain higher 
education expenses, first-time home purchase expenditures, and small 
business capitalization.
  Additionally, this bill would create a tax credit to defray the cost 
of establishing and running IDA programs, contributing matching funds 
to the appropriate accounts, and providing financial education to 
account holders. Program sponsors could be qualified institutions, 
qualified nonprofits, or

[[Page S4418]]

qualified Indian tribes, and would have to be an institution eligible 
under current law to serve as the custodian of IRAs. Sponsors could 
claim a tax credit that would have two components. The first would be a 
$50 credit per account to offset the ongoing costs of maintaining and 
administering each account and providing financial education to 
participants. Except for the first year that an account is open, the 
credit would be available only for accounts with a balance, at year's 
end, of more than $100. In addition, there would be a credit for the 
dollar-to-dollar matching amounts.

  IDAs work to spur savings by low-income individuals. The American 
Dream Demonstration, ADD, a 14-site IDA program, has proven that low-
income families, with proper incentives and support, can and do save 
for longer-term goals. In ADD, average monthly net deposits per 
participant were $19.07, with the average participant saving 50 percent 
of the monthly savings target and making deposits in 6 of 12 months. 
Participants accumulated an average of $700 per year including matching 
contributions. Importantly, deposits increased as the monthly target 
increased, indicating that low-income families' saving behavior, like 
that of wealthier individuals; is influenced by the incentives they 
receive.
  Additionally, key to the success of IDAs is the economic education 
that participants receive. Information about repairing credit, reducing 
expenditures, applying for the Earned Income Tax Credit, avoiding 
predatory lenders, and accessing financial services helps IDA 
participants to reach savings goals and to integrate themselves into 
the mainstream economic system. The encouragement and connection to 
supportive services helps low-income individuals to keep early 
withdrawals to a minimum and overcome obstacles to saving. Banks and 
credit unions benefit from these new customer relations, and States 
benefit from decreased presence of check-cashing, pawnshop, and other 
predatory outlets.
  But more than income enhancement, asset accumulation affects 
individuals' confidence about the future, willingness to defer 
gratification, avoidance of risky behavior, and investment in 
community. In families where assets are owned, children do better in 
school, voting participation increases, and family stability improves. 
Reliance on public assistance decreases as families use their assets to 
access higher education and better jobs, reduce their housing costs 
through ownership, and create their own job opportunities through 
entrepreneurship.
  We must re-instill the value that Americans once put into saving and 
promote an ownership society. Saving must once again become a national 
virtue. At stake are not just the financial security and prosperity of 
Americans as individuals but America as a nation. This bill takes a 
step in reaching out to low-income Americans to meet this goal.
  I urge my colleagues to support the Savings and Working Families Act 
of 2005.
                                 ______