Source: kate_sept2004 / Getty
Democratic lawmakers want to entitle newborns to a proposed federal check of up to $2,000 annually.
Called the American Opportunity Accounts, Congresswoman Ayanna Pressley (MA-07) and Senator Cory Booker (D-NJ) are spearheading an ambitious legislation designed to tackle wealth inequality, with its nickname being the “baby bond” funds.
As MADAMENOIRE previously reported, in 2019, Black Americans had one-sixth of the wealth of white Americans, with more than half of Black people saying it is challenging to overcome wealth inequality, according to a Pulse of Black America survey.
“The racial wealth gap in America is the result of generations of precise and intentional policy violence, so we must be as intentional and as precise about advancing policies that address it head on,” said Representative Pressley.
“Baby Bonds are one of the most effective tools we have for closing the racial wealth gap and breaking the cycles of poverty and trauma that have prevented Black and brown folks from thriving in this country, so it is no surprise that this idea has gained traction in states across the country. Black lives and Black wealth matter, which is why Congress must pass our bill without delay,” she continued.
The proposed – “seed savings account of $1,000 at birth” – bill is an interest-bearing account that gradually receives additional deposits depending on family income.
The baby bond money is federally insured and managed by the U.S. Department of the Treasury, and it can be accessed when the child becomes 18.
The legislation claims it is already fully paid for, with the implications of “making common sense reforms to federal estate and inheritance taxes, including restoring the estate tax to 2009 levels,” according to the proposal.
″‘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,” Booker said in a statement.
The legislation suggests the child would use the funds to secure a home or pay for educational expenses, but it does not appear the money has limitations.
In a hypothetical situation based on 2019 estimates, the proposal chart shows in a generalized, unspecified city and state, a family of four living less than 100 percent of the Federal Poverty Level (FPL), making less than $25,100 a year, is eligible for the $2,000 baby bond funds.
By the time the children are 18, their accounts could have a balance of $46,215 each.
Affluent families are eligible for their newborns to receive funding as well, albeit the more the family makes, the less money will be deposited.
Suppose a family of four lives more than 500 percent of the FPL, making greater than or equal to $125,751 a year. In that case, the children of those families will not receive anything besides their seed interest money.
Support for the bill includes names such as Sens. Chuck Schumer, D-N.Y.; Elizabeth Warren, D-Mass.; and Bernie Sanders, I-Vt.
As MN previously reported, the racial wealth gap has been widening for years.
In 1992, the median net worth of white families was between $100,000 and $150,000, which is far more than Black families, which had less than half of $50,000, according to McKinsey.
From the 1990s to 2016, the median net worth of Black families has been consistently low.
The median net worth of Black families is less than that of Hispanic families, though, it is not a significant advantage.
During that same time, the median white family gained about $50,000 more in net worth since the 1990s and after the Great Recession.
RELATED CONTENT: Biden Administration Will Begin To Roll Out Third Child Tax Credit Payments To Eligible Families
