Democratic lawmakers in Washington are renewing the baby bond bill to give every American child $1,000 at birth.
The ‘Baby Bond’ Bill
The “baby bond” funds, called American Opportunity Accounts, plus to be topped off with up to $2,000 per year, depending on a family’s income. The accounts would be federally insured and governed by the US Department of the Treasury.
Account holders would be competent to access the funds once they turn 18 to pay for eligible uses, such as higher education, homeownership, starting a business, and saving for retirement. The bill, called the American Opportunity Accounts Act, was re-introduced by Sen. Cory Booker, D-N.J., and Rep. Ayana Pressley, D-Mass last week.
For a family of four with a below $25,100 income, the accounts may earn $46,215 by the time a child turns 18, based on 2019 estimates. Those sums would be reduced for families with higher earnings, as annual supplement payments gradually phase out. For a family of four with an income of $125,751, a child reaching 18 would get an estimated account balance of $1,681, with $0 annual payments.
The Baby Bond Aims To Tax estates, And heirs To Give Youngest Americans A Lift
The baby bond legislation names for making the changes fully paid for by increasing inheritance and estate taxes. A 2019 study by the Committee for a Responsible Federal Budget found the bill’s proposed revenue growth would more than offset the cost of the legislation. According to the lawmakers, the policy is aimed to narrow the wealth gap, which has risen dramatically in the past 50 years. It may also support the persistent racial wealth gap. The idea of baby bonds is acquiring traction in some states.
Baby bond legislation has passed in California, Connecticut, and Washington, DC and another eight states have introduced legislation, according to the Urban Institute. These states are New Jersey, New York, Wisconsin, Iowa, Washington, Nevada, Delaware, and Massachusetts. The terms for how much funds would supply, as well as lawful uses for the money, vary. The total endowments by adulthood begin from $3,000. The federal proposal, which would give almost as much as $50,000 to the lowest-income families, is the most generous.
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