New ‘Trump Accounts’ Program Sparks Controversy: Is It Favoring the Rich Over Struggling Kids?

WASHINGTON — A new proposal nestled within a comprehensive bill is drawing both interest and skepticism. The “Trump Accounts,” which would extend a tax-advantaged investment account seeded with $1,000 for newborns, is aimed at addressing economic disparities in the U.S.

Financial experts and advocates for economically disadvantaged children, however, are hesitant about its effectiveness. This concept mirrors existing “baby bonds” initiatives in states like California and Connecticut, aimed at mitigating the wealth gap. A federal version of this proposal has also been introduced by Congressional Democrats.

The White House promotes the program as “pro-family,” asserting it will offer future generations opportunities for fiscal growth. During a recent event to endorse the “Trump Accounts,” President Trump asserted that the initiative would aid countless children without burdening taxpayers.

Top House Republican tax writer, Rep. Jason Smith of Missouri, emphasized the initiative’s potential to benefit all children, regardless of their background. However, critics contend that the proposal may primarily advantage wealthier families.

Concerns abound regarding how the accounts would function. The accounts would be available to U.S. citizens born from 2025 to 2028, provided their parents have Social Security numbers. Financial contributions from relatives, employers, and private organizations could total up to $5,000 annually. While deposits are taxed, withdrawals would incur capital gains tax after reaching eligibility.

Upon turning 18, beneficiaries could access half of their account, but only for qualified expenses, such as education or home purchasing. The remaining funds would be accessible after age 25, with accounts losing their special status at age 31.

The Urban Institute has raised alarm bells about the account structure predominantly benefiting wealthier families. Notably, lower-income households typically hold half as much cash on hand compared to wealthier ones. The think tank suggests enhancing contributions based on income and easing withdrawal penalties for emergencies.

In contrast, a recent proposal by Sen. Cory Booker and Rep. Ayanna Pressley aims to make accounts more beneficial for low-income families, proposing an initial $1,000 deposit coupled with annual contributions based on income.

Critics argue the intent behind the proposal lacks thorough consideration, questioning the wisdom of the GOP’s focus on inaccessible funds over the expansion of the child tax credit. The Center on Budget and Policy Priorities highlights that millions of children miss out due to existing restrictions.

Another point of contention is that Trump Accounts may complicate the existing landscape of tax-preferred savings vehicles. Experts believe that the U.S. already has sufficient options, like 529 accounts and IRAs, and that a simplified approach would be more effective.

Last updated 10:23 a.m., Jun. 26, 2025