Trump touts $1,000 'Trump accounts' for babies born in US
FILE-President Donald Trump sits in the Oval Office of the White House in Washington, D.C. (Jim Lo Scalzo/EPA/Bloomberg via Getty Images)
A proposal by House Republicans and supported by President Donald Trump would create a tax-deferred investment account for babies born in the U.S., starting them each with $1,000.
The announcement of this plan comes as Congressional Republicans and Trump face criticism for possible cuts to programs that low-income families with children depend on, including food assistance and Medicaid.
What are ‘Trump accounts’ and how do they work?
Why you should care:
The proposed plan would have the federal government deposit $1,000 into individual accounts for babies born between January 1, 2025, and December 31, 2028.
According to the AP, at least one parent would have to produce a Social Security number with work authorizations, meaning the U.S. citizen children born to some classifications of immigrants would be excluded from the benefit.
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Once the child turns 18 years old, they can withdraw the money to put toward a down payment for a home, education or to start a small business. The Associated Press reported that if the money is used for other reasons, it will be taxed at a higher rate.
CNN reported that the family and others can make annual contributions to the account if the amount doesn’t surpass $5,000 annually, but nonprofit organizations can potentially donate more.
This proposal is also like the concept of "baby bonds," which California, Connecticut, and Washington, D.C. introduced as a strategy to minimize financial disparities between wealthy people and low-income individuals.
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Economist Darrick Hamilton of The New School told the AP that the Republican plan would worsen rather than improve wealth gaps.
"It is upside down," he said. "It's going to enhance inequality."
Hamilton also told the AP that $1,000 — even with interest — would not be enough to make a significant difference for a child living in poverty.
The Source: Information for this story was provided by the Associated Press and CNN. The AP cited comments from an economist about the "Trump accounts." This story was reported from Washington, D.C.