Baby Bond Bill

Apparently, a bill is being reintroduced to Congress soon that would give Americans $1K per birth event and up to $2K per year for the child based on income. That's right - reintroduced. Apparently, this didn't go over well the first time, so time will determine if the bill gets passed or rejected this time.

Before you get too excited, let's take a deeper dive and look at this proposed bill more closely. Does the money go directly to the parents, or an account made for the child that the parents will have access to? The short answer is no. The accounts for this effort would be federally insured and managed by the U.S. Department of Treasury. The balance will become available once the child turns 18 and the money can only be used for a select number of reasons including, but not limited to, education and homeownership. So, had this bill been passed in 2019, for a family of four under the federal poverty level would have $46,215 for their child once they hit 18. Meanwhile, a family of four with a net income of $125,751 would have $1,681 for their child once they hit 18. Please note that in these values the income based annual payments and interest are taken into account.

How would this bill be funded? By raising inheritance and estate taxes. In other words, money and assets that have already been taxed will be taxed again at higher rates in order to pay for a program that has funds available for limited use. What is the purpose of this bill? Allegedly, the purpose of this bill is to attempt to fix the "broken tax code" by providing every child with start-up capital. In theory, it would help drive down the wealth inequality, but in all honesty, the brackets that were determined for this effort likely need to be re-evaluated.

Two teachers can make anything between $60,000 and $170,000 annually depending on the school system, afterschool programs, and tenure. Is it fair for their kids to get $1,000 and no monthly payments? It may make more sense to have a sliding scale depending on the number of people and where the middle measurement is considered to be for the whole value of the bill and anything above that is where the annual $2,000 begins on the sliding scale. Especially since we have been seeing a significant decline in the middle class over the last decade at least, it would be good to see some support for the middle class families in addition to those living below the federal poverty level. Which, in case you weren't aware, a four person household of four is roughly between $52,000 and $157,000.

Have any of the states passed baby bond legislation? Apparently, yes. California, Connecticut, and Washington, D.C. have also passed baby bond legislation and Iowa, New Jersey, New York, Wisconsin, Washington, Delaware, Nevada, and Massachusetts are all considering baby bond bills. Obviously, since these bills are being introduced and passed at the state level the payments, taxes, and total endowments by adulthood vary from state to state, but the federal proposal would mean standardization and so far is the most generous policy.

While this seems to be a decent idea, we would like to see something in place that defines what happens in different circumstances. For example, if there is a birth event that takes place and the infant passes away due to no fault of the parents, where does the $1,000 payment go? If a child is born and does not live until 18 years of age, what happens to the money that was accumulated? If a child chooses not to use the money they were given, are those funds transferable to another family member and what do those circumstances look like? 

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