Your kid is getting a ‘Trump account.’ Should you put your money in it?

“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.)

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.

The law requires the new investment accounts to track a U.S. stock index

“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.”

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.

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.”

https://finance.yahoo.com/news/kid-getting-trump-account-put-182354610.html

“All Our Future Money Is Gone”: The Impossible Task of Providing Child Care in Rural Illinois

“About 70% of rural Illinoisans live in a child care desert, forcing tough choices on parents: Some drive 100 miles a day or more to find care, others leave the workforce.”

https://www.propublica.org/article/childcare-rural-illinois-challenges

Where J.D. Vance’s weirdest idea actually came from

“The “extra votes for parents” proposal came in a 2021 speech sponsored by the Intercollegiate Studies Institute, a conservative organization that encourages college students to engage with right-wing ideas. About halfway through the speech, Vance says that he wants to “take aim at the left, specifically the childless left.”
He knows these comments will be controversial: He says “I’m going to get in trouble for this,” and then asks the hosts if he’s being recorded. But he continues on by listing off leading Democratic politicians who didn’t have children at the time — Kamala Harris, Pete Buttigieg, Sen. Cory Booker, Rep. Alexandria Ocasio-Cortez — and then asks, “Why have we let the Democrat Party become controlled by people who don’t have children?”

Of course, this is misleading: Harris is a stepmother and Buttigieg has become a father since Vance’s remarks. But the specific examples are less important than Vance’s general point, which is a moral one.

In his view, being a parent is the primary source of happiness and meaning in a person’s life, and people who don’t have kids can’t be trusted to make decisions in the interest of society writ large. Societies are good, per Vance, when they have babies; if they don’t have enough, they rot.

So what to do about it? Vance suggests borrowing ideas from Viktor Orbán, Hungary’s authoritarian prime minister who has made increasing Hungary’s birthrate a centerpiece of his policy agenda. But Vance also worries that a Hungarian model might not be possible because families suffer from a “structural democratic disadvantage”: children can’t vote. Hence, he concludes, we should let parents cast votes on their behalf.

“Let’s give votes to all the children in this country and let’s give control over votes to the parents in this country,” he says.

It’s an old idea called “Demeny voting,” named after 20th-century Hungarian demographer Paul Demeny (a vocal champion of the idea). Typically, the argument for Demeny voting is rooted in fairness. Children are people who, like anyone else, deserve political representation. Since they lack the maturity to make informed choices about their interests, parents should vote on their behalf — much in the same way they make decisions about children’s medical care or education. To get a sense of how this argument works, I’d recommend a recent paper by two law professors at Harvard and Northwestern making the case at length.

But for Vance, the policy isn’t just about ensuring fairness for families: it’s about punishing childless adults. Vance sees Demeny voting as a tool for creating two-tiered citizenship, one where parents have more and better political representation than other adults.

“When you go to the polls in this country, you should have more power — more of an ability to speak your voice in our democratic republic — than people who don’t have kids,” he says. “If you don’t have much of an investment in the future of this country, then maybe you shouldn’t get nearly the same voice.”

This is not the language of a liberal looking to expand the sphere of people whose interests are represented in the system to children. Vance’s defense of Demeny voting reveals a belief that people who aren’t like him, who don’t share his values about childrearing, are social unequals: non-participants in the political project of ensuring America survives across generations, and hence deserved targets of political discrimination.

In short, Vance wants to turn the law into a vehicle for legislating hard-right morality.”

https://www.vox.com/politics/363473/jd-vance-weird-voting-parents-demeny-postliberalism

How states humiliate single parents who need government assistance

“To receive government assistance in the US is to submit yourself to a whole host of requirements, some reasonable, some harsh. Each state, and each program within it, has their own requirements, which might be a test of income, of assets, or even of behavior. Some are reasonable — a millionaire probably doesn’t need food stamps; others are more punitive. A disabled single man wanting to get Medicaid in Maryland, for instance, has to show he doesn’t have assets totaling over $2,500. To receive unemployment benefits in Texas, quitting a job to take care of a child makes you ineligible, unless that child has a medical illness.
One requirement is especially odious, and little-known and little-studied: In many states, for many aid programs, you must agree to cooperate with authorities on enforcing child support against the parent of your child.

Depending on the state where they live, a single parent may have to agree to help the government recoup child support in order to receive child care assistance, food stamps, cash welfare, or Medicaid. They may have to establish parenthood of their child, provide estimated dates and locations of conception, home or work addresses of the other parent, or even sign away their right to child support payments to the state.

Given that around 80 percent of custodial parents are women, this is a welfare restriction with a disproportionate effect on one gender — and one that explicitly punishes you for being a single parent.”

“As a country, we’ve operated under a perverse version of the maxim that it’s better to let 10 guilty men go free than one suffer: that it’s better that 10 deserving people receive nothing than a single undeserving one get health care or food. Small-government conservatives create bureaucracies to try to prevent it, and states micromanage peoples’ lives watching for it. But the government doesn’t need to operate that way”

https://www.vox.com/2023/9/20/23880723/child-support-parents-government-assistance-requirement