Seven promising policies to reduce wealth inequality


November 19, 2015

Democratic presidential candidates Bernie Sanders, Hillary Clinton, and Martin O’Malley have all taken positions on inequality and the middle class, with Sanders especially vocal on wealth inequality. At the second Democratic debate on Saturday night, Sanders called out the country’s “massive levels of [both] income and wealth inequality."

Wealth is often neglected in the inequality conversation. Income gaps are only part of the story when it comes to economic inequalities in America. Wealth inequality is even greater. And lack of wealth creates its own set of long-lasting harms, often handicapping economic mobility and leaving families exposed to financial risks. Policies aimed at helping low-wealth families save for emergencies, a child's education, a home, and a secure retirement can improve families’ financial stability and serve as a springboard to the middle class.

As the candidates continue to flesh out plans to address inequality and expand opportunity, what evidence-based policies should they consider? Based on our research, we’ve identified seven promising policies to shrink wealth inequality:

  1. Promote emergency savings with incentives linked to savings at tax time.
  2. Offer matched savings such as universal children's savings accounts.
  3. Reduce reliance on student loans while supporting success in postsecondary education.
  4. Reform safety net program asset tests, which can act as barriers to saving among low-income families.
  5. Ensure access to homeownership and maintain programs that can help lower-income families become successful homeowners.
  6. Limit the mortgage interest tax deduction and use the revenues to provide a credit for first-time homebuyers.
  7. Establish automatic savings in retirement plans.

By more efficiently and equitably promoting saving and asset building, more people may have the tools to protect their families in tough times and invest in themselves and their children.