Trump Accounts are a good idea that needs improvement

I agree with the concept behind Trump Accounts — enacted as part of the misnamed “One Big Beautiful Bill Act” — even if the name shows just how overly narcissistic our current president clearly is.

The government giving each child $1,000 to automatically invest in diversified U.S. stock index funds or exchange-traded funds is a good idea. Interestingly, some groups have criticized the program as being too government oriented, the same way that many decades ago conservatives once attacked Social Security as being “socialism.”

I was married and had two children by the time I was 19. As someone who got his education the hard way — earning both my bachelor’s and master’s degrees at night at Georgia State University while working during the day — I support government-funded savings accounts for our kids. If I had resources when I was 18, my life would have been much easier.

The idea is for this to be a pilot program retirement fund for children born between Jan. 1, 2025, and Dec. 31, 2028, with a tax penalty of 10% if the money is withdrawn early. The adult who initiated the account becomes “custodian” until the child is 18. However, the exceptions are so broad that money can be taken out early to buy a first home, pay specified medical expenses and similar emergencies, childbirth or adoption and pay for college.

Jack Bernard, formerly a corporate senior vice president and director of health planning for Georgia, is now a community activist. (Courtesy)

I was married and had two children by the time I was 19. As someone who got his education the hard way — earning both my bachelor’s and master’s degrees at night at Georgia State University while working during the day — I support government-funded savings accounts for our kids. If I had resources when I was 18, my life would have been much easier.

The idea is for this to be a pilot program retirement fund for children born between Jan. 1, 2025, and Dec. 31, 2028, with a tax penalty of 10% if the money is withdrawn early. The adult who initiated the account becomes “custodian” until the child is 18. However, the exceptions are so broad that money can be taken out early to buy a first home, pay specified medical expenses and similar emergencies, childbirth or adoption and pay for college.

But there is a lot in this legislation that I do not agree with. As is true with many bills coming out of this administration, the wealthiest Americans seem to reap the rewards under this bill. “Tax-preferred accounts primarily benefit families that already have spare time and money, not the families that need the most help,” the Tax Law Center says.

Specifically, there can be additional contributions to these accounts up to $5,000 annually. These contributions can come tax free from a variety of sources, including employers, local/state government and nonprofits. About 100 organizations, including the state of Georgia, have indicated willingness to participate. However, these are highly unlikely to be a significant source of investment versus individual contributions.

More to the point, more affluent parents can use the Trump Accounts as a tax advantaged way to transfer generational wealth. Specifically, income in these accounts is not taxed until withdrawal.

It is my hope that in 2029, when there is a new administration and Congress, this legislation will be reviewed and revised. The concept is a good one, and the inequalities can be remedied so that benefits are more equitably distributed.