Create Universal Savings Accounts

Current law provides at least 11 different types of tax-advantaged saving vehicles, each with a variety of rules and limitations: four main types of retirement saving provisions, four more for saving related to education and disabilities (including the One Big Beautiful Bill Act’s Trump Accounts), three more for saving related to health and dependent care, and one for saving related to emergencies. Other countries have found a simpler, more widely available solution to boost saving for taxpayers across income levels. Universal savings accounts (USAs) are tax-advantaged savings vehicles with unrestricted use of funds, allowing participants to save for a variety of reasons, including retirement, education, housing, health, unemployment, and emergencies.

This option establishes Roth-style universal savings accounts, permitting individuals to contribute $10,200 post-tax to a USA in 2027, indexed to inflation thereafter. Unused “contribution room” can be carried forward to the next year. Earnings on contributions grow tax-free. Withdrawals are allowed at any time for any reason without penalty or further taxation and are added back to contribution room. For example, if an individual withdraws $1,000, contribution room increases by $1,000.

USAs would reduce the tax burden on saving, especially for low-and middle-income taxpayers. Domestic saving would rise, and more of the returns to domestic investment would flow to Americans. However, the larger budget deficit would increase federal government borrowing, and more interest payments would flow to foreigners, resulting in a decline in GNP. USAs would also slightly decrease marginal tax rates on income, leading to a small expansion in economic output.

On a conventional basis, this option would increase the primary deficit by $161.8 billion over the budget window. Long-run GDP would rise slightly, while long-run GNP would fall slightly. Incorporating changes in interest costs, the publicly held debt-to-GDP ratio would be higher than baseline, reaching 178.5 percent by 2056.

On average, in 2036, taxpayers would see increases in their after-tax incomes of 0.1 percent, and that would rise on a long-run dynamic basis to an average increase of 0.3 percent.