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It’s well known that Donald Trump loves to send taxpayer dollars directly to voters with packaging intended to make the bounty seem like a gift from his own self. So it’s not surprising that his signature One Big Beautiful Bill Act had a provision creating something called “Trump accounts” that would be set up for all American children born between 2025 and 2028 with a $1,000 “seed deposit” from the federal government. A nice birthday gift for these kids, right?

Well, yes, but it’s likely to be a bigger gift for America’s more fortunate sons and daughters than for poorer kids. “Trump accounts” are loosely based on an idea two progressive economists (Darrick Hamilton and William Darity) developed in 2010, known as “baby bonds.” Their motivation was to find a way to disrupt deeply entrenched racial wealth disparities by giving all kids (but especially those from disadvantaged backgrounds) a financial nest egg that would be available for key asset purchases once they reached adulthood, as a Brookings Institution paper explains:

The government would make an initial deposit into an interest-bearing account on behalf of each newborn baby in the United States, while also making additional deposits throughout their childhood. Children from the lowest-wealth households would receive the largest endowment.

At age 18, individuals would gain access to the funds, which could only be used to invest in wealth-generating assets, such as a home, post-secondary education, or a small business startup. While Baby Bonds are nominally race-neutral, Black, Hispanic, and Indigenous children — whose parents hold significantly less wealth than their white counterparts, on average — would benefit the most in terms of asset ownership and wealth accumulation.

Legislation based on the Hamilton-Darity proposal was first introduced in Congress in 2019 by Senator Cory Booker and Congresswoman Ayanna Pressley, both Black Democrats. Booker also avidly promoted “baby bonds” during his unsuccessful 2020 presidential campaign. Now, Booker finds himself confronted with Trump’s twist on “baby bonds,” which is a lot less generous toward poor people than the original proposal and is in fact quite likely to prove a boon for wealthy parents and their children. Here’s how Brookings describes “Trump accounts”:

Trump accounts allow parents and employers to contribute up to $5,000 per year (indexed for inflation) to individual retirement accounts on behalf of children under the age of 18, regardless of their parents’ income … Funds in these accounts can be invested in any mutual fund or exchange-traded fund that tracks the S&P 500 or is comprised primarily of U.S. companies.

While contributions made by parents are not tax-deductible, contributions made by employers — capped at $2,500 per year (also indexed for inflation) — do not count towards employees’ taxable income. Taxes on investment earnings are deferred but taxed as ordinary income upon withdrawal.

Contributions to Trump accounts can be made beginning next July 4 (another Trumpian twist), but initially, at least, a special tax form must be filled out by parents.

There’s less government money involved than with the original “baby bonds” but more tax subsidies for private contributions by parents and their employers, which overall makes the scheme significantly more regressive:

Many policymakers predict that these accounts will disproportionately benefit wealthy Americans. Research from other wealth-building policies suggests that wealthy individuals are significantly more likely to contribute to voluntary “asset-subsidy schemes,” and that these individuals hold considerably more wealth in tax-advantaged accounts than asset-poor families. “A wealthy family could build a $150,000 nest egg by the time their child turns 30. Meanwhile, a child from a low-income family is likely to be left with about $2,500,” Connecticut Treasurer Erick Russell said of Trump accounts.

But there is one loophole that could help families of modest means build up larger Trump account nest eggs: large private donations. This possibility got a lot of attention recently when tech billionaire Michael Dell and his wife Susan announced a $6.25 billion donation that would expand the pool of beneficiaries, as PBS reported:

With the Michael & Susan Dell Foundation’s donation, children 10 and younger born before 2025 will receive $250 in their Trump accounts. The children also must live in ZIP codes where the median family income is below $150,000.

Other organizations [may] be inspired to follow in the Dells’ footsteps. That’s because the accounts are constructed with a unique feature allowing organizations, such as cities, state and nonprofits, to contribute to all children in a “qualified class,” like those born in a certain year or state.

This avenue for plussing up Trump accounts convinced Cory Booker to become a cheerleader for big corporate donations to Trump accounts, in combination with the original legislative sponsor for Trump’s idea, notes Roll Call:

Sens. Ted Cruz, R-Texas, and Cory Booker, D-N.J., teamed up on a letter sent to Fortune 1000 CEOs on Monday encouraging their companies to contribute to the new investment accounts created for young children …

“These tax-advantaged accounts ensure that every American child is an immediate shareholder in America’s largest companies and will experience the miracle of compound growth through their lifetime,” Cruz and Booker wrote in their letter seeking corporate contributions …

“What happened with these accounts is not the version I would have done,” Booker said in a brief interview. “I think there’s a lot of things we can do to improve it, but for every child in America to have an individual investment account could be game-changing, especially if we can get the number of that initial investment up as much as possible.”

Booker likely envisions that a future Democratic president and congressional majority might make Trump accounts more closely resemble the original “baby bond” proposals. But we’re probably stuck with the name for the foreseeable future.

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