Tax Credits and IDA Programs

Individual Development Accounts (IDAs), a new economic policy instrument, were introduced by Michael Sherraden in 1991. IDAs are part of an asset-building policy strategy that seeks to reduce wealth inequality by enabling asset-poor individuals to accumulate assets. Low-income individuals establish savings accounts matched by public and private resources, which are then used to purchase assets. Part of the rationale for the use of public resources for IDAs is that the non-poor already receive large subsidies for asset accumulation through tax benefits, which the poor cannot take advantage of (Sherraden 1991, 2001). Savings accrued in IDAs are generally used for home ownership, business capitalization, and post-secondary education. Tax credit programs have emerged as a community economic development strategy in the United States over a number of decades. These programs are designed to advance public policy goals by leveraging private sector funding. During recent years several national-level social welfare and community development organizations have backed proposals for state and federal legislation
incorporating tax credits for IDAs.

Project: State Assets Policy Project