“Republicans’ “big, beautiful bill” includes a gift to millions of families: $1,000 in an investment account for every eligible newborn.
The new savings vehicles, akin to Individual Retirement Accounts, are designated for children who are U.S. citizens born from 2025 through 2028. In addition to the one-time government contribution, parents and others can chip in as much as $5,000 a year to the accounts, which beneficiaries can access at 18, with some constraints.
The seed money is a boon for recipients and will grow tax-deferred. Financial planners say parents and guardians might do better putting their money into existing investment vehicles such as a 529 plan, a savings plan designed to cover college expenses. But 529s are limited to education, while backers say the new accounts can help their recipients beyond college.
Republican lawmakers call the accounts “Trump accounts,” though the Senate’s plan to officially name them after the president did not make it to the final version of the legislation, which was signed Friday. They deliver on an idea that both Democrats and Republicans have floated for years: to invest money for all children at birth.
Withdrawals from a 529 are not subject to state or federal taxes as long as the funds go toward qualified education expenses – a feature the new investment accounts don’t share. And in the new accounts, parents’ deposits don’t qualify for a tax deduction, notes Greg Leiserson, a senior fellow at the Tax Law Center at New York University. “You have this very slight or minimal-to-nonexistent tax benefit,” he said. “What is the point here?”
Financial adviser Amy Spalding of Chapel Hill, North Carolina, said she will continue to steer her clients to 529s. “It’s better from a tax standpoint,” Spalding said. “And there are more investment options. And then there’s a higher contribution limit.” (For 2025, a single person can deposit as much as $19,000 a year into a beneficiary’s 529, while married couples can contribute as much $38,000.)
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withdrawals will be taxed at typical income rates, not at the capital gains rate of a taxable brokerage account. “For most people, this is going to be worse than what they could do in a taxable account,” he said.
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The law requires the new investment accounts to track a U.S. stock index
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“If you’re saying, ‘Okay, I’m going to start school in the fall’ – if the market falls over the summer, the planning you were doing about how you were going to pay for college is totally messed up, because the money you thought would be there, isn’t.”
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account holders cannot touch the funds until they turn 18. After that, the rules are the same as those of an individual retirement account – withdrawals are taxed like income, plus an additional 10 percent tax penalty on any withdrawals before age 59½ except for certain qualified uses.
Those uses include paying for college, supporting themselves if they become disabled, or recovering from domestic abuse or a natural disaster. Beneficiaries also can withdraw as much as $10,000 to buy their first home, and up to $5,000 when they have a new baby themselves.
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Even one of the Trump accounts’ biggest proponents in Congress, Rep. Blake Moore (R-Utah), said in an interview that for many parents, the new account design offers more benefits for retirement than for college expenses.”
“the bill does not include a provision to eliminate federal income taxes on Social Security benefits.
“There is no provision in the budget bill that directly ‘eliminates’ or even reduces taxes on Social Security benefits,” Howard Gleckman, senior fellow at the nonpartisan Tax Policy Center, told the Washington Post.
Trump’s bill offers a tax deduction of $6,000 to seniors making up to $75,000 individually, or $150,000 on a joint return. The deduction is lowered for incomes above that level and axed for seniors with individual incomes of more than $175,000, or $250,000 jointly. However, the new deduction for seniors is set to expire within a couple of years. The median income for seniors in 2022 was about $30,000.”
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“Before the megabill’s passing, 64 percent of seniors receiving Social Security income paid no tax on their Social Security due to exemptions and deductions, according to an estimate by Trump’s Council of Economic Advisers. Under Trump’s megabill, 88 percent won’t be paying.”
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the rise is due to the bill’s increase in “the standard deduction for seniors, which, as a result, reduces the number of seniors who will pay taxes on their Social Security benefits.”
…the new legislation will provide limited benefits for lower-income seniors because they already pay less in taxes.”
Although both parties have been fiscally irresponsible, the Republicans have been more irresponsible, despite talking about it more. The Democrats tend to offset some of their spending with taxes. Republicans just take on debt to pay for wars and tax cuts that mostly benefit the wealthy.
“So what does Mamdani actually want to institute, if elected in November, and why would it suck so much?
Consider free childcare, which his canvassers seemed to believe would be persuasive to me as I walked past them last night with my 2-year-old. Under Mamdani, the state would provide childcare—via taxpayer-funded daycares, akin to the universal 3K program currently in place (which doesn’t always provide parents with options they actually want)—for all aged six weeks to 5 years old. But if the idea is to lighten parents’ financial load, why aren’t all forms of childcare treated the same? Why don’t stay-at-home mothers get vouchers from the state to recoup loss of income? Why don’t neighborhood babysitting collectives get help? Why is one form of childcare—administered by the state—privileged above all others? Many education savings account programs, such as the one administered by Florida, recognize that assistance from the state, if it is to exist at all, ought to be handed straight to families so that they may use it as they wish. For socialists to offer universal state-run childcare as some great liberator is frankly insulting to many mothers; in the magnificent post-work future the socialists herald, won’t many women choose to spend more time with their children, not less?
City-run grocery stores—another of Mamdani’s proposals—look like a solution in search of a problem. Food deserts—geographic zones where there aren’t any affordable, healthy options available to residents—don’t exist in New York City.
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Then there’s Mamdani’s rent freeze. He hopes to fully eradicate all rent increases for the roughly 2 million New Yorkers who are currently the beneficiaries of the city’s rent-stabilization scheme, claiming this will be a boon to the working class. What he does not realize is that decades of city-sanctioned housing market distortion is what has led to untenably high rents in the first place (plus it being too difficult to build), and that many of the beneficiaries of rent stabilization are not the poorest of the poor, but rather people whose friends or family have treated other people’s real estate as their own inheritances.
And don’t even get me started on the will-he-or-won’t-he of defunding the police. Mamdani, like all progressives swept up in the cultural fervor of George Floyd Summer, once talked big talk about defunding the police (a feminist issue, he says!), but has now motte-and-baileyed his way back to more social workers and investing in mental health services including voluntary rehabilitative programs. Other hints about what Mamdani believes: “Jails are not places where people can recover from a mental health crisis, and they often have punitive responses to mental health needs” and lots of talk about reducing stigmas and improving access to care. As with food deserts, Mamdani seems to genuinely believe that violent people in the midst of mental breakdown just don’t have access to care, and that if it is simply offered to them, they will no longer resort to terrorizing their fellow man. This strikes me as a simplistic understanding of this problem which would erase the improvements in crime rates made so far in 2025.
In order to pay for all these proposals—the grocery stores, the daycares, the corps of social workers, the fare-free buses (which 48 percent of New Yorkers fail to pay for in the first place, unfortunately)—Mamdani will simply press the button socialists love: Institute a 2 percent flat tax on those earning over $1 million. What Mamdani does not realize is that you cannot abuse the “tippy top.” It is the HENRYs (“high-earners, not rich yet”) or the “working rich” who are perhaps the best examples of meritocracy in action; they’re not the “idle rich”—those who’ve inherited their wealth or made it long ago, who are now mostly price-insensitive and untouchably well-off—and they’re frequently glued to Manhattan for industries like finance, law, and tech. Meet your tax base, Zohran. You should worry if they flee to the outlying suburbs.”
Wealthy people and great entrepreneurs aren’t going to not start that great business because they will pay more taxes if they make it big. Either way, if successful, they would have done something great and will be rich.
The most profitable and flexible workforce for Americans is illegal immigrants.
When we put tariffs on China, we are saying every country on Earth can get low inputs from China except America, making American business less competitive.
“”The OECD now forecasts global economic growth to slow to 2.9% this year from 3.3% in 2024,” notes Bloomberg. “It expects the rate of expansion in the US will tumble further, to 1.6% from 2.8%—an outlook that is significantly lower than its projection in March.””