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Monday, July 6th, 2020 WHAT YOU MISSED
Check out this graph, which depicts the median net worth for young households as a percentage of median home price—in other words, the percentage down payment they could afford if their net worth were typical and applied entirely to the purchase of a typical home: Median Net Worth as a Percentage of Median Home Value, by Age of Household Head
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PRICED OUT: WHY FEDERAL TAX DEDUCTIONS MISS THE MARK ON FAMILY AFFORDABILITY In a recent report, Senior Economist Alan Cole breaks down the relationship between the tax code, housing prices, and family affordability. "While [itemized deductions in the tax code] are intended to increase housing affordability and are a boon to current homeowners, they can have the perverse effect of increasing the price of existing homes, making it hard for young would-be-homeowners looking to buy for the first time. ... There is a strong family affordability case for avoiding policies that increase home prices ... This time structure for the expenses—a bigger up-front cost, followed by cheaper after-tax monthly payments—is not a favorable schedule for Americans under 45, who have plenty of earning years remaining but relatively fewer savings. Evaluated through the lens of family affordability, this is a failure. People under 45 are responsible for 99.75% of births in the United States. Their families are most likely to be growing, and they are most likely to need more space. If public policy is to have an effect on the timing of house payments, it should make that timing more favorable to people in the under-45 age bracket, not less. At a minimum, it should do no harm. Therefore, this report recommends the continued limitation of housing-related tax deductions, especially at the higher end of the market where they are most likely to be capitalized into higher home prices."
Trends in Homeownership by Head of Household Age
SAVING FOR SOCIAL CAPITAL In our most recent report, Saving for Social Capital, Senior Economist Christina King argues that Universal Savings Accounts (USAs) may rebalance our tax policy and help families save. "Unfortunately, under current tax policy, saving and asset-building are disadvantaged relative to spending, with the exception of certain government-approved savings goals. What is more, the savings vehicles that promote those goals largely fail to benefit lower-income and working-class Americans, in part due to the many rules and restrictions on their use. Universal savings accounts (USAs) may provide a solution: USAs generally exempt either contributions or distributions from taxation, rebalancing tax policy so that saving is on equal footing with spending. Unlike traditional tax-neutral savings vehicles, USAs allow saving for all goals, not just government-approved ones. ... USAs would be accessible by design. Unlike some savings accounts, such as health flexible spending accounts or pensions, USAs would be portable—not tied to a single employer. Additionally, USAs would provide an alternative savings vehicle for those who do not have access to employment-based health and retirement savings accounts. Unlike current saving accounts, there would be no barriers to opening a USA. Nor would there be restrictions on the use of savings from USAs, making them especially accessible to low- and middle-income Americans vulnerable to negative income shocks. ... USAs would assist families as they pursue their own savings goals throughout life, and they would finance the creation and deepening of valuable relationships and institutions throughout American society. They would promote charitable giving to help Americans in need, and they would help lower-income Americans help themselves."
Percent of Canadians and Americans Paticipating in Selected Savings Accounts, 2016, by Income Quartile
REOPEN READINESS TRACKER Earlier this month, the Joint Economic Committee released a "Reopen Readiness Tracker," created by Senior Economist Christina King, to provide policymakers and the public timely information to assess the extent to which public health conditions support economic activity. A recent research post introduces the tracker's purpose and features: "As state and local governments seek to re-open businesses and public spaces safely, various organizations and government agencies have recommended a number of convergent data-driven criteria to guide them. These include:
The JEC chairman’s office used these metrics to create the Reopen Readiness Metric Tracker, an interactive web page that provides real-time state- and county-level data on COVID-19 cases and testing. The aim is to provide policymakers and the public timely information to assess the extent to which public health conditions support economic activity."
RECENT HEARINGS This month, the Joint Economic Committee held a hearing on charitable giving during the COVID-19 crisis. The witnesses who testified before the Committee were: Senator James Lankford (R-OK), Senator Jeanne Shaheen (D-NH), United Way of Salt Lake President and CEO Bill Crim, and Indiana University professor Dr. Una Osili.
You can watch the full hearing and read our witnesses' testimonies as well as JEC Chairman Mike Lee's opening statement here.
RESEARCH POSTS We're linking our work on social capital to the ongoing COVID-19 pandemic. Check out our new research posts below:
 Look out for upcoming reports on family stability, foster care, and mentorship from the Social Capital Project!
WHAT WE'RE READING
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