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Republicans are proposing to turn American babies into tiny investors by awarding them $1,000 in a so-called Trump Account.
Senator Ted Cruz has been championing the baby-bond style accounts after a chance conversation over a poker game in Las Vegas last year led him to tech investor Brad Gerstner, an advocate for creating investment accounts for children in the US.
“This will make every new child a capitalist,” Cruz told the Financial Times. “Ten years from now, [when] a 10-year-old pulls out the app on his phone and looks at his account, he will no longer think of big, bad corporations, but he’ll look and say, Hey, I own 100 bucks worth of Apple. I own 75 bucks of Boeing. I own 50 bucks of McDonald’s.
“That child will be an owner and investor in the businesses that drive our economy. And that, I think, will have profound positive impacts for decades to come.”
The Trump accounts were part of the president’s sweeping, multitrillion-dollar tax bill, which passed in the Republican-controlled House of Representatives on Thursday.
House Republicans initially called the proposal “money account for growth and advancement” or “Maga” accounts after Trump’s political movement, but changed the name hours before passing the bill in a tribute the president.
According to the legislation, $1,000 accounts would be created for all American babies born between December 31 2024, and January 1 2029 and the children would not have access to the funds until they turned 18. Individuals can contribute up to $5,000 per year to the accounts, but this must be invested in a “well-established index of United States equities”.
The programme would cost more than $17.3bn, according to the Joint Committee on Taxation.
The bill now goes to the Senate, where Cruz is leading the charge to expand the proposal to babies born over the next decade. The Texan senator claimed that due to “the miracle of compound growth”, a fully-funded account every year could increase to $170,000 by the time the child becomes 18 years old.
“It’s the exact opposite of socialism,” said Cruz. “Socialism is the government ownership or control of the means of production or distribution. This is the ownership and investment in our businesses by millions and millions of Americans, private citizens. It is making them capitalists, and it is doing so for pennies on the dollar.”
The right-leaning Tax Foundation has criticised the proposal for complicating the tax code, calling it “a new baby bonus entitlement that requires taxpayers to track yet another small dollar account for 18+ years”.
Democrats have lambasted Republicans for naming the accounts after Trump, noting that Delaware Democratic senator Cory Booker had advocated for “baby bonds” for years.
“For all the talk of my colleagues not treating him like a king, it sure seems like you’re attempting to do so,” said lawmaker Joe Neguse, a Colorado Democrat. “You all would be screaming bloody murder if we named savings accounts after Barack Obama.”
