U.S. Senator Ted Cruz (R-Texas) introduced legislation on Thursday aimed at simplifying personal savings and providing families with greater financial flexibility. The Universal Savings Account Act proposes the creation of a new type of tax-advantaged savings vehicle with fewer restrictions and penalties compared to existing options.
Companion legislation was simultaneously introduced in the House of Representatives by Rep. Diana Harshbarger (R-Tenn.-1).
READ: Voters Approve Elon Musk’s Starbase: New Texas Town Incorporated At SpaceX Site
The proposed Universal Savings Accounts (USAs) would function as tax-exempt savings vehicles where distributions are not subject to income tax and are not included in gross income. A key feature highlighted by proponents is the unrestricted use of funds, allowing individuals to save, invest, and withdraw money for any reason without incurring penalties typically associated with early withdrawals from retirement or education accounts.
Senator Cruz emphasized the need for a straightforward savings tool. “A simple and accessible incentive savings plan will provide families with a way to establish financial security and prosperity,” said Senator Cruz. “This bill provides a straightforward solution to those challenges. I strongly urge my colleagues to pass this bill for the future generations of Americans.”
Under the bill, contributions to a USA would have an initial annual limit of $10,000, increasing by $500 each year until capping at $25,000. Unlike some other tax-advantaged accounts, there would be no income-based restrictions on who can contribute.
READ: Paxton Hails Texas School Choice Bill As “Major Victory,” Vows To Defend Against Legal Challenges
“It’s an honor to partner with Senator Cruz on this commonsense legislation to empower Americans to take control of their financial futures,” said Rep. Harshbarger. “The Universal Savings Account Act cuts through red tape and gives every American a flexible, tax-free way to save, invest, and spend — without government interference or penalties. Washington shouldn’t be in the business of micromanaging how people use their own money. This bill is a win for working families, a win for personal freedom, and a win for financial independence.”
Experts cited in the background information provided with the bill suggest that Universal Savings Accounts could particularly benefit low-income households by boosting their savings capacity. This increased savings could help families better withstand economic shocks, such as pandemics and recessions, and facilitate planning for significant expenses like expanding a family, pursuing education, or housing needs.
The bill outlines specific requirements for the accounts, including that contributions must be in cash (except for rollovers from other USAs), the trustee must be a bank or approved entity, the account holder’s interest must be nonforfeitable, and assets cannot be commingled except in common funds.
The accounts would be subject to taxes on unrelated business income. The legislation also includes provisions for handling excess contributions and prohibited transactions, as well as reporting requirements.
Please make a small donation to the Tampa Free Press to help sustain independent journalism. Your contribution enables us to continue delivering high-quality, local, and national news coverage.
Connect with us: Follow the Tampa Free Press on Facebook and Twitter for breaking news and updates.
Sign up: Subscribe to our free newsletter for a curated selection of top stories delivered straight to your inbox.
