Ted Cruz Backs Trump Accounts for Kids
The "Trump accounts" proposal has sparked debate about its potential impact on wealth disparities, with some arguing that it would widen the wealth gap, while others see it as an opportunity to give every child "some skin in the game" and make them a capitalist, as Senator Cruz believes.
US Senator Ted Cruz is pushing for a bill that would give every American baby $1,000 to invest in a federally facilitated savings account, known as "Trump accounts," which can be used for education expenses, a down payment on a first home, or to start a small business.
The accounts, available to all US citizens under 8 years old, come with a $1,000 deposit from the federal government and can be funded with up to $5,000 per year. The balance will be invested in a diversified fund, and qualified withdrawals are taxed at the long-term capital-gains rate. The measure, initially called the "Invest America Act," has been rebranded as "Trump accounts" and included in the GOP's "One Big Beautiful Bill."
However, tax and economic experts have mixed views, with some expressing concerns about the impact on low-income families and suggesting a progressive structure or universal savings account. The Congressional Budget Office estimates that the bill's provisions, including the new accounts, would reduce the financial resources of households in the bottom tenth of the income distribution by $1,600 a year, while raising the resources of households in the top tenth by an average of $12,000 a year.
Critics argue that the Republican proposal is regressive, with the benefits going primarily to affluent families, and that it would be more effective to address wealth disparities through a more progressive approach, such as the "baby bonds" initiative proposed by progressive economists Darrick Hamilton and William Darity, Jr.