Building the American Dream: Asset-Building as a Foundation

Building the American Dream: Asset-Building as a Foundation

August 3, 2004
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The federal government helps Americans build personal wealth in a variety of ways, most notably with tax breaks related to homeownership and retirement savings. However, most of this assistance goes to people who are already doing well. In 2003, the federal government spent $110.5 billion in homeownership incentives, the bulk of which accrue to better-off families. For example, nearly 90 percent of the mortgage interest deduction benefit accrues to tax filers with adjusted gross incomes over $50,000. Homeowners are even able to deduct mortgage interest on second residences. Meanwhile, tens of billions of dollars in tax breaks to encourage retirement savings go to Americans whose significant net worth already guarantees a secure retirement.

New steps are urgently needed to extend asset-building efforts down the economic ladder and enact policies that benefit all Americans. Expanding homeownership should be a major priority. The most significant impediment toward purchasing a first home is the ability to save enough money for a down payment, particularly as housing prices have rapidly increased. Combine these challenges with existing low levels of asset accumulation and it becomes clear that several types of new policies are needed to help all Americans become stakeholders in our society.