How $1,000 Baby 'Trump Accounts' Could Impact VA Families

Parents of newborns in Virginia would benefit under a five-year pilot program tucked inside the massive U.S. House spending bill that would give them $1,000 to invest in their baby’s future.

On its face, the proposal attempts to give all children a trust fund of sorts when they reach adulthood. That’s standard for children of wealthy parents, whose largess gives their kids a leg up on less affluent peers, who may receive nothing at all, or may be expected to help support their families.

The proposal, which is backed by President Donald Trump, would create tax-deferred investment accounts — coined “Trump Accounts” — for babies born in the U.S. over the next four years, starting them each with $1,000.

“This is a pro-family initiative that will help millions of Americans harness the strength of our economy to lift up the next generation,” Trump said at a White House event Monday for the proposal. “They’ll really be getting a big jump on life, especially if we get a little bit lucky with some of the numbers and the economy.”

Here are five things Virginia parents need to know:

What Do Parents Have To Do?

One pro of the program is that it’s low-touch for parents and enrollment is automatic. The U.S. Treasury would set up and fund the accounts

The program would be retroactive to Jan. 1, 2025, and babies born through Dec. 31, 2028, would be eligible as long as they have a Social Security number.

However, some children born to some categories of undocumented immigrants wouldn’t get the benefit, even though they are legal “birthright” U.S. citizens.

How Much Would It Grow?

While the investment would be symbolically meaningful, it’s a relatively small financial commitment to address child poverty in the wider $7 trillion federal budget. Assuming a 7 percent return, the $1,000 would grow to roughly $3,570 over 18 years.

Of course, the baby’s parents and others may make annual contributions to the account, not to exceed $5,000 a year, although nonprofits may be able to donate more, CNN Business reported .

Also, the money must be invested in a low-cost, diversified U.S. stock index fund or equivalent until the beneficiary turns 18.

Would The Benefit Be Taxed?

Taxes are deferred until the beneficiary withdraws the money. Withdrawals for qualified expenses — a down payment on a home, an education or to start a small business — would be classified as capital gains, which are taxed at a lower rate than ordinary income.

However, if a beneficiary under the age of 30 used these distributions for non-qualified expenses, they would be taxed as ordinary income and subject to an additional 10 percent penalty.

In any case, the money may not go far in helping a young adult get started in life, according to Madeline Brown, senior policy associate at the Urban Institute.

“There are lots of different projections around what $1,000 can grow to with different interest rates, but it’s not a down payment,” Brown told CBS News . “So unless additional contributions come from the community, the federal government or state governments, we’re not likely to see these accounts grow to the sums that we're saying are qualified uses.”

What Are The Income Guidelines?

There are no income guidelines. The proposal is unlike other baby bond programs, such as those in California, Connecticut and the District of Columbia, that generally target disadvantaged groups. Families of all incomes, even the wealthiest of Americans whose children’s trust funds may be in the millions or billions, would receive the benefit.

Economist Darrick Hamilton of The New School, who first pitched the idea of baby bonds a quarter-century ago, told The Associated Press the GOP proposal would exacerbate rather than reduce wealth gaps. When he dreamed up baby bonds, he envisioned a program that would be universal but would give children from poor families a larger endowment than their wealthier peers, in an attempt to level the playing field. The money would be handled by the government, not by private firms on Wall Street.

“It is upside down. It's going to enhance inequality,” Hamilton said, adding that $1,000 — even with interest — would not be enough to make a significant difference for a child living in poverty.

How Are Poor Families Affected?

Critics say the proposal doesn’t go far enough to help poor families. The Trump administration and Congressional Republicans already face backlash for proposed cuts to programs that poor families with children rely on, including food assistance and Medicaid.

Even some who generally believe baby bonds have merit are skeptical, noting Trump wants to cut higher education grants and programs that aid young people on the cusp of adulthood — the same age group Trump Accounts are supposed to help. Pending federal legislation would slash Medicaid and food and housing assistance that many families with children rely on.

Young adults who grew up in poverty often struggle with covering basics like rent and transportation — expenses that Trump Accounts could not be tapped to cover, Eve Valdez, an advocate for youth in foster care in southern California, told The AP. Valdez, a former foster youth, said she was homeless when she turned 18.

Accounts for newborn children that cannot be accessed for 18 years mean little to families struggling to meet basic needs today, said Shimica Gaskins of End Child Poverty California.

“Having children have health care, having their families have access to SNAP and food are what we really need ... the country focused on,” Gaskins told The AP.

The Associated Press contributed reporting.

Get The Latest Local News (For Free!) With One Quick Tap

READ MORE:

• New Trump Tariffs: What VA Residents Need To Know
• How Proposal To Gut Education Department Could Affect VA
• Trump Proposal To Eliminate Federal Taxes At 150K: What It Means In VA

The article How The $1,000-Per-Baby ‘Trump Accounts’ Would Affect VA Parents appeared first on Old Town Alexandria WELLNESSINVESTIGATOR .

Share this post