An Assets Agenda for the States

Pulling yourself up by your bootstraps and a “hard work” ethic are the hallmarks of America’s definition of success. To achieve success and the economic mobility of the American Dream, however, requires not only the ability to generate income, but also the ability to translate such income into assets. While income may measure whether or not a person has enough to get by, assets measure whether or not a person has enough to get ahead.

The U.S. government has long recognized the distinction between these two concepts. In fact, throughout its history the federal government has designed and implemented policies and programs to help families build assets. In fiscal year 2013, the federal government will spend, through both direct outlays and tax deductions and credits, nearly $548 billion on asset building policies. Unfortunately these policies are terribly skewed, often subsidizing the wealthiest at the expense of the nation’s poor.

A prime example is the tax code, which rewards wealth and exacerbates wealth inequality. A typical middle-class household making $50,000 a year receives less than $500 in benefits from the most expansive of these federal policies annually and families making $100,000 get about $2,000. By contrast, taxpayers bringing in more than $1 million enjoy $95,820 in annual support through mortgage and property tax deductions and investment tax breaks.

At the same time, the racial wealth gap has also grown significantly. The median wealth of a white family in 2009 was 20 times greater than that of the average black family, and 18 times greater than the average Hispanic family. The average white family had $113,149 in net worth, compared to $6,325 for Hispanics and $5,677 for blacks. This is the largest gap since the government began collecting this data a quarter of a century ago, and twice what it was before the start of the Great Recession. While financial assets, such as stocks, held largely by wealthier Americans, have made a roaring comeback, the value of homes, the main source of wealth for average Americans and most Hispanics and blacks, has remained significantly depressed.

Given current wealth disparities, we must focus on creating tools that working families can use to build financial stability. Despite state budget crises, opportunities exist on the state level to create asset building policies and programs. This paper endeavors to examine current state asset building efforts with an eye toward examining those policies and priorities that are emerging as trends in this challenging economic environment.

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