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Upside Down: The Failure of Federal Tax Policies to Support Emergency Savings

In: A Fragile Balance

Author

Listed:
  • Ezra Levin

Abstract

Nearly all families experience fluctuations in income, and low- and moderate-income (LMI) families appear increasingly likely to experience significant income interruptions (see Collins, this volume). Almost half of Americans are “liquid asset poor,” meaning they lack even a modest amount of accessible savings to tap into in the case of an emergency (Brooks et al. 2014). Liquid savings and long-term savings or assets are quite different forms of financial resources. Using long-term savings as liquid savings can have serious consequences. For example, withdrawals from retirement or education savings accounts often come with significant financial penalties. Likewise, borrowing against home equity can be difficult, especially in the short term. In the case of an emergency, households without accessible savings must rely on family, friends, high-cost credit, or the high costs of missing payments.

Suggested Citation

  • Ezra Levin, 2015. "Upside Down: The Failure of Federal Tax Policies to Support Emergency Savings," Palgrave Macmillan Books, in: J. Michael Collins (ed.), A Fragile Balance, chapter 0, pages 39-53, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-137-48237-2_3
    DOI: 10.1057/9781137482372_3
    as

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