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On February 7, Senator Jeff Flake (R - Arizona) and Representative Dave Brat (R - Virginia) reintroduced a bill into the US Congress that would create flexible, tax-free savings accounts.
They pointed out that savings vehicles currently available to taxpayers, such as individual retirement accounts and health savings accounts, lock money up for extended periods of time and limit withdrawals for specific expenses. These excessive restrictions and penalties for tax-advantaged accounts can dis-incentivize saving.
In contrast, the Universal Savings Account (USA) Act would incentivize saving through the creation of flexible Universal Savings Accounts (USAs). The bill would allow any individual over the age of 18 to contribute up to USD5,500 in after-tax income annually into a USA where those funds can grow tax-free. Account holders would always have the freedom to withdraw those funds, without the imposition of tax, at any time and for any reason.
"Our tax code shouldn't penalize savers for accessing their own money when they need it," said Flake. "The USA Act provides consumers with a flexible option to grow their savings tax-free without burdensome federal restrictions."
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