State Asset Building Initiatives

OVERVIEW

Increasingly, state officials are designing broad-based efforts to support wealth building by low-income families. While states and localities have supported different forms of community wealth building in some areas for at least the past couple of decades, it is only within the last few years that this has become an explicit policy goal. Today, state policy-makers and nonprofit and business leaders are coming together to discuss ways to strengthen and connect existing community wealth building strategies, identify new approaches, and implement public policies that help make these opportunities accessible to more working families.

These state initiatives include a variety of efforts to support wealth building by families and individuals, as well as building community-based efforts. For instance, Pennsylvania’s asset building program includes increased state funding for community development financial institutions, while the Asset Policy Initiative of California’s task force has recommended support for CDFIs, as well as community land trusts and cooperative business development.

While each state initiative is unique, they all share the common goal of enabling lower-income families to save and invest to build wealth. The initiatives also share common strategies, such as:

• Increasing access to financial education;
• Developing policies to promote saving and investment for education, homeownership, small business development, and retirement;
• Helping families preserve their wealth by expanding access to insurance and by limiting predatory lending; and
• Identifying ways to make tax-based savings incentives accessible to lower-income families.

This last point bears emphasis. Tax-based savings incentives have a long tradition in America, but primarily for upper-income Americans. A Corporation for Enterprise Development (CFED) report found that the value of federal government tax expenditures to promote individual wealth building in FY 2003 was $335 billion. This is ten times the amount the federal government spent on housing assistance and more than three quarters of the $405 billion spent by the Pentagon that year. Where was this $335 billion spent? In three areas, primarily: home ownership subsidies (such as the mortgage interest deduction), retirement savings subsidies (such as individual retirement accounts), and savings and investment tax incentives (such as capital gains tax reductions). In FY 2003, the wealthiest one-percent of taxpayers received $112.9 billion in tax benefits—more than $38,000 per family. By contrast, American families in the 80th income percentile or lower received a total benefit of $53.6 billion—or less than $250 per family.

State asset policy initiatives come out of the realization that the model of government subsidy for savings and investment, which has benefited upper middle class and wealthy Americans, might, with some modifications, also be made to work for lower-income Americans. The success of the pilot individual development account program (annual cost: $25 million—less than ten cents per capita) indicates the plausibility of leveraging small amounts of government funds to obtain much larger increases in wealth building.

State asset policy initiative advocates hope that by adding new resources and using a wider range of individual and community wealth building techniques, more effective and comprehensive community wealth building support systems can be established.