Senators Introduce Bipartisan Bill to Help Workers Save EITC, Other Tax Refunds
By Marie Wilken
Today, a bipartisan group of senators – Cory Booker (D-NJ), Tom Cotton (R-AR), Heidi Heitkamp (D-ND), and Todd Young (R-IN) – reintroduced the Refund to Rainy Day Savings Act, which would allow taxpayers to divert a portion of their tax refund to savings for later in the year.
Each year, more than 100 million Americans receive tax refunds, many of which are bolstered by refundable tax credits like the Earned Income Tax Credit (EITC). But, according to Prosperity Now, nearly 30 percent of U.S. households don’t have savings accounts, and their tax refunds – the biggest cash infusion most of these households receive all year – likely won’t last until emergencies come around later. That’s why legislators have introduced a way for taxpayers to save part of their refund for a “rainy day.”
Under the proposed legislation, taxpayers who receive their refund through direct deposit could opt into the savings program on their 1040 tax form. The program would divert 20 percent of their refund into a Treasury-held account to accumulate interest. Six months later, the funds would transfer to the taxpayer’s direct deposit account.
Savings are an essential part of financial security. They help families weather “rainy days” – like a loss of income, medical emergencies, car troubles or other economic setbacks. The proposed legislation acknowledges the need to make savings accounts more accessible for low-income families. It also underscores the importance of strengthening the EITC and other tax credits. Not only are they vital antipoverty programs, but with legislation like the Refund to Rainy Day Savings Act, they can also empower workers to save.