Ryan Bourne and I proposed that America adopt a Canadian-British innovation to encourage more personal savings. Those nations created accounts that are like supercharged Roth IRAs, and which have revolutionized savings for families at all income levels.
Republicans in Congress adopted the idea and included USAs in their Tax Reform 2.0 package, which passed the House in September. Individuals would deposit after-tax funds in the accounts, and then the earnings would grow tax-free and could be withdrawn at any time for any reason with no taxes or penalties. USAs would allow Americans to save without the restrictions and complexity of other vehicles.
The Heritage Foundation has released an excellent new analysis of USAs by Adam Michel. Michel discusses how USAs would boost personal savings, simplify taxes, and help lower-income families. He discusses the success of USA-style accounts in Canada and Britain, and he also notes that South Africa has introduced the accounts.
Michel concludes that USAs would “help families build their own financial security through a single, simple, and flexible account.” Family financial security should be a bipartisan goal, and so USAs could be something that the parties work on together next year in a split Congress.
More reading on USAs:
https://object.cato.org/sites/cato.org/files/pubs/pdf/tbb-77-update-2.pdf
https://www.cato.org/blog/universal-savings-accounts-can-fix-401k-leakage
https://www.cato.org/blog/universal-savings-accounts-usas-introduced
http://thefederalist.com/2015/05/11/a-tax-reform-we-can-all-support/