THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Wednesday, February 7, 1996 TAG: 9602070406
SECTION: LOCAL PAGE: B1 EDITION: FINAL
SOURCE: BY MIKE KNEPLER, STAFF WRITER
LENGTH: Medium: 94 lines
An administration proposal before the General Assembly would provide tax-free savings accounts and matching donations to help low-income Virginians put aside money for homes, education, job training or starting a new business.
The Neighborhood Assistance and Family Savings Act that Gov. George F. Allen is promoting would allow the poor to save up to $1,200 a year in tax-free accounts, which could be matched by as much as $600 from charitable contributions.
The legislation, House Bill 1045 and Senate Bill 567, will be considered by both house and senate finance committees today.
``It doesn't sound like a lot of money, but for a thinking person, a person with a dream, that money could go a long way,'' said Pearl White, of Norfolk's Olde Huntersville neighborhood.
After getting budget counseling and other help from the nonprofit Olde Huntersville Development Corp., White bought a home in the mid-1980s. Since then, she said, she's become more aware of financial matters and more confident when taking risks.
White, who quit her naval baseclerical job, now is a budding entrepreneur with a home-based fashion-accessory company. A tax-free savings-account program, she said, would help her buy a computer for her business or allow her to take more college courses. She said the savings accounts also could help low-income mothers start home day-care centers or businesses such as cleaning services.
Arlene Barber, a part-time janitor living in Norfolk's Diggs Town, said the savings-account program would help but would not be a permanent route out of poverty.
``Give people decent jobs with decent benefits. If you do that, you wouldn't need programs like this,'' said Barber, 47, who works 24 hours a week for a private contractor at Norfolk Naval Base.
Barber, a single mother, said she's tried to save money but often has had to deplete her account for emergencies, including car repairs. ``I saved $400 for that car, but it's been giving me trouble ever since. The battery, tune-ups . . . That just drained my little account,'' she said.
The program under consideration would be available to families with incomes up to double the poverty level, or $30,300 for a family of four.
Participants would be able to accumulate a maximum of $10,000. The accounts would remain tax free as long as withdrawals were used for a first house, education, job training or to open a small business.
In addition, those who donated to supplement the savings accounts would be able to claim a 50-percent credit against their taxes. A $600 donation would reduce state taxes by $300.
``I think it's a great bill,'' said Del. Kenneth R. Melvin, D-Portsmouth, a member of the House subcommittee considering the bill. ``Any bill that encourages saving by the poor is a benefit. For so long, the working poor have had to live paycheck to paycheck. Anything that moves them away from that situation has to be viewed positively.''
Similar programs have been started in other states, but Virginia's would be ``the best test that any state has yet to introduce,'' said Robert E. Friedman, a San Francisco-based advocate of tax-free savings accounts for the working poor.
The Virginia proposal would authorize 10,000 tax-free accounts.
Meanwhile, Congress is considering a $100 million national demonstration effort.
Proponents of the accounts say the programs can help low-income people develop the financial assets that many middle-class households already have.
Letitia Batey, president of the Olde Huntersville Development Corp. and a former banker, was lukewarm about the savings program.
For many people, she said, ``it's just hard to save . . . And, to me, the benefit of not being taxed on it is pretty negligible.
``But as part of a bigger picture, it can help, especially if the money gets matched.''
Ideally, the accounts would be administered by nonprofit community groups in partnerships with banks, said Shea Hollifield, associate director of the Virginia Department of Housing and Community Development.
Hollifield has had to dispel a perception that the tax credits involved in the savings accounts would take away from those now designated to help charities.
The proposed legislation sets aside $1 million worth of new tax credits to help the savings-account program, she said.
``We recognize that the charities are very positive programs,'' Hollifield said. ``This (savings-account) program isn't designed to replace any existing program. It's designed to supplement ongoing activities.'' MEMO: Staff writer Toni Whitt contributed to this story.
ILLUSTRATION: Graphic
HOUSE BILL 1045 and SENATE BILL 567
[For complete graphic, please see microfilm]
KEYWORDS: GENERAL ASSEMBLY by CNB