What to know about "MAGA accounts," the GOP's $1,000-per-baby pitch
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The GOP tax bill includes Republican packaging of what is more often a Democrat's proposal – money for every baby in the country.
Why it matters: The $4 trillion tax legislation would seed $1,000 for every American baby born over the next few years, the type of no-strings-attached cash infusion that Republicans often oppose.
- Dubbed the "MAGA Accounts Contribution Pilot Program," Republicans aren't shy about making the policy a calling card for the party.
Who came up with "MAGA accounts"?
Catch up quick: Kevin Hassett, director of the White House National Economic Council, last year began promoting, along with economist Robert Shapiro, $1,000 accounts for newborns.
- It's a "simple solution to help people be connected to financial markets so everybody in the country shares in the wealth," Hassett said at a presentation to the Aspen Institute in October.
- Sen, Ted Cruz (R-Tex.) has been a major proponent of the idea, endorsing it at a Republican retreat this month.
- "The case I made to my colleagues is: We should ask ourselves in this bill, what will be the legacy that people will remember and talk about 10 years from now, 20, 30, 40 years from now?" Cruz told Semafor last week.
And President Trump put his stamp of approval on it as well.
- "MAGA accounts would empower American children to reap the American Dream with a strong financial foundation," Trump spokesman Harrison Fields told Bloomberg in a statement.
Who qualifies for the money?
- The government would give qualifying children a one-time payment of $1,000, with the U.S. Treasury automatically setting up accounts for eligible children who don't already have them.
- Eligible children must be U.S. citizens "at birth," have a Social Security number, and be born between December 31, 2024 and January 1, 2029.
- Wall Street firms are excited about the possibilities; contributions are in cash but "would be administered by banks or other institutions," as Bloomberg explains.
- They would also be invested in stocks, which is part of the pitch — get kids babies invested in the stock market early.
What are the tax benefits?
State of play: In addition to the seed money for newborns, the accounts are meant to function as savings nests for children, and could be set up by parents with children under the age of eight beginning January 1, 2026.
- Money contributed to an account wouldn't be taxed until it's withdrawn.
- Beneficiaries would pay long-term capital gains tax rates, which are far lower than the tax rates on regular income, if the money goes to qualifying expenses like education or a mortgage.
- It's less beneficial than a 529 plan, in which withdrawals are tax-free for a variety of educational expenses, and whose contributions might be eligible for state income tax deductions.
How much would this plan cost the government?
By the numbers: $1,000 for each baby born from 2025 through 2028 would cost nearly $13 billion, per the Joint Committee on Taxation.
- According to the JCT, the tax benefits over ten years add up to about $4.5 billion.
What are baby bonds?
Context: Democratic Sen. Cory Booker pitched "baby bonds" as a feature of his 2020 presidential campaign, also involving $1,000 savings accounts for American babies. Rep. Ayanna Pressley (D-Mass.) was also an advocate.
- Economist Darrick Hamilton first proposed baby bonds as a way of narrowing the racial wealth gap.
- Several states have set up or will set up baby bond programs. In 2023, Connecticut became the first state to fully fund and implement one.
- Hamilton criticized the MAGA accounts proposal, which he called a way to "address wealth inequality on the cheap."
