Why Assets Matter

Change that Lasts
Traditional approaches to fighting poverty have focused on meeting the immediate needs of low-income populations, offering essentials like food, clothing and shelter. While these approaches provide vital services for people in crisis, they do not offer a path that leads permanently out of poverty.

By focusing on helping low-wage, working families build assets, like homes, small businesses and higher education, EARN helps these families take the next steps – steps toward long-term prosperity.

How do assets help? Assets enable families to access education and training opportunities; they provide the liquidity families need to survive a crisis, like a serious illness or a sudden job loss; and some assets, like home equity, provide additional benefits like residential security and tax advantages. Unlike income from a job, assets can also be passed down to children and grandchildren, helping families stay out of poverty for generations.

Furthermore, assets can enhance the relative political “voice” of their owners. As noted by New York University economist Edward N. Wolff: “…in a representative democracy, the distribution of power is often related to the distribution of wealth.” [i]

A growing body of research suggests that assets are critical to building social and economic security. According to recent research, assets:
· Decrease economic strain on households;
· Are associated with educational attainment;
· Decrease marital dissolution;
· Decrease the risk of intergenerational poverty transmission;
· Increase health and satisfaction among adults;
· Increase property values;
· Decrease residential mobility;
· Increase property maintenance; and
· Increase local civic involvement. [ii]

As American as The G.I. Bill
Asset-building policies—policies that help families to build wealth for current and future generations—have long been an integral feature of the American political and economic landscape.

In 1863, the Homestead Act provided thousands of American families with farms and new homes, enabling them to leverage assets for future generations. In the mid-1900s, the GI bill helped millions of World War II and Korean War veterans to invest in homes and education. Today, similar policies provide incentives for American taxpayers to save and invest in their families and in their communities. Tax deductions on home mortgage interest, tax incentives to save for retirement and education, and publicly-subsidized employer-based health insurance coverage enable millions of Americans to build assets throughout their lifetimes. [iii]

America’s long-standing commitment to asset building is an implicit social and economic policy, demonstrated by the fact that almost $300 billion per year in federal tax expenditures goes to support asset building among individuals through the tax code.

But these asset-building policies do not benefit all Americans. For example, families who cannot afford to put a down payment on a home and qualify for a mortgage cannot take advantage of generous income-tax deductions for mortgage payments and property taxes. In fact, it is households earning over $50,000 a year that receive over 90% of the benefits of the home mortgage tax deduction.[iv]

While EARN works to help families build assets, it is also working to create more equitable asset-building policies, so that all Americans have the support they need to build a brighter future.

For more information on EARN’s work on asset policy, please visit its Web site for the Asset Policy Initiative of California (APIC).
www.assetpolicy-ca.org

[i] Wolff, E. N. (2001) “Recent Trends in Wealth Ownership, From 1983 to 1998” in Assets for the Poor: The Benefits of Asset Ownership. New York: Russell Sage Foundation. p. 34.

[ii] Scanlon, E. and Page Adams, D. (2001). Effects of Asset Holding on Neighborhoods, Families and Children: A Review of Research in Building Assets: A Report on the Asset Development and IDA Fields. Washington D.C.: Corporation for Enterprise Development.

[iii] Michael Sherraden, “Asset-Building Policy and Programs for the Poor,” in Thomas M. Shapiro and Edward N. Wolff, eds. Assets for the Poor: the Benefits of Spreading Asset Ownership. (New York: Russell Sage Foundation, 2001). p. 302.

[iv] Ibid, p. 304.



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