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Hira Shakeel
BSL 401 -D
Question 1, whether there are other ways the tax code could be used to incentivize emergency
Saving money especially for families earning barely enough to pay their basic expenses, isn’t always a
priority. Mostly my peers agreed on how a plan to promote boost different kinds of crisis reserve funds
would be for the code to offer more noteworthy tax reductions to savers As any interest procured on
savings is taxable income, people should be exempted from this.
My peer Stone presented the idea of a matched Savings programs to encourage consumers to
save by providing them with a financial match—such as $0.50 or $1 in match funds—for each $1 saved
in a specified savings account (for applies for tax, employers, and non-profits), and also mentioned how
Prize-linked savings (PLS) accounts incentivize people to save by providing them with a chance to win
financial prizes when they save. My peer, Ana, was of the view that self-employment expenses
deduction could also incentivize emergency savings. As economic market has shifted drastically over
the past 6 months; many people lost their jobs, and the option allows for home-office rent, car and
supply expenses and many more deductions under the 1099 status
Undoubtedly, as agreed by everyone, the complexity of the tax code is a reason for the lack of
emergency savings in this country. My peer Ross believed to combat this, financial literacy and health
education must be more prevalent in this country. The most common response to this question was a
creation of some sort of special tax account. My peer Carolina was of the view that Additional
incentives can be created to cause people to want to save more, such as creating an “emergency savings
account” Funds saved into that account can only be used for qualified pre-defined emergencies (i e ,
loss of job, sudden death of a family member that contributed to household income, disability or
sickness of a household member that causes an individual to forego income pay, etc ) and could be
considered tax free/deferred. Special tax accounts just like Retirement accounts as suggested by
Matthew Hellinger. Tax cut jobs acted in 2017, where one gets a 20% reduction on your qualified
business income to kind of match up with the 21% corporate tax rate could help save.