Democratic lawmakers in Washington are proposing the revival of a plan to provide $1,000 to every American child at birth through the American Opportunity Accounts Act, commonly known as “baby bonds.”
AL reported that the initiative, introduced by U.S. Sen. Cory Booker, D-NJ, and Rep. Ayanna Pressley, D-MA, would establish a federally-funded savings account for each child to reduce the wealth gap and offer equal opportunities to all in America.
This is a representation photo of a baby under a blanket as the American Opportunity Accounts Act that would offer a $1,000 savings account to every child at birth has been reintroduced in the Congress. (Photo by Omar Lopez on Unsplash)
American Opportunity Accounts Act: How Baby Bonds Work
CNBC and AL explained that the baby bonds under the American Opportunity Accounts Act would receive yearly deposits of up to $2,000 based on the family’s income, with account holders gaining access to the funds at age 18 to purchase homes or pay for education.
The amount in the account would vary according to family income, but a family with an annual income of $25,100 or less could have $46,215 saved by the child’s 18th birthday.
Once account holders reach the age of 18, they would have the ability to use the funds for qualifying purposes, including higher education and homeownership.
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Taxing Inheritance, Estates
The proposed American Opportunity Accounts Act requires that the alterations be fully financed by increasing taxes on inheritance and estates. The bill’s proposed revenue increases would surpass the cost of the legislation, as per a 2019 analysis by the Committee for a Responsible Federal Budget.
“‘Baby bonds’ would fix our broken tax code by providing every American child with start-up capital for their life, and helping to drive down the wealth inequality that holds American families back from their full potential,” Brooker said in a statement.
According to the legislators, the objective of the proposal is to reduce the widening wealth inequality that has occurred over the last 50 years, which may also assist in addressing the ongoing racial wealth disparity.
Pew Research Center reports that in 2016, the median wealth for Black households was $17,100, while Hispanic households had $20,600, and white households had a median wealth of $171,000.
Baby Bonds in Other States
The concept of baby bonds under the American Opportunity Accounts Act is gaining traction in some states. California, Connecticut, and Washington, D.C. have already passed baby bond legislation.
In contrast, Iowa, New Jersey, New York, Wisconsin, Washington, Delaware, Nevada, and Massachusetts have introduced similar legislation, as per the Urban Institute.
The available amount of funds and permissible uses vary, with total endowments starting from $3,000 at adulthood. The federal proposal is the most extensive, providing nearly $50,000 to the lowest income families.
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