A new tax bill introduced in Congress aims to create MAGA savings accounts for kids. But what are they and how would they work?

Washington

A new tax bill introduced in the United States Congress proposes the creation of so-called MAGA savings accounts for children. In this context, "MAGA" stands for "Money, Account for Growth and Advancement." Under the plan, every American child born during a designated period would receive an initial $1,000 deposit from the government into a savings account.

The accounts are intended to grow over time through compounded interest and allow additional contributions from family, friends, or employers, up to a maximum of $5,000 each year. The funds could not be accessed by the child until they reach the age of 18, and could only be used for specific expenses such as education or buying a first home.

Erica York of the Tax Foundation noted that similar savings mechanisms have long been used by wealthier families, and this program may help make such savings opportunities more widely available. However, the current proposal does not include extra incentives, such as deductions, to encourage ongoing contributions from parents. York also pointed out that a single $1,000 deposit, left untouched for 18 years, is unlikely to make a significant impact on college tuition or a home purchase.

Unlike the existing state-run 529 plans—available in every state except Wyoming—which allow families to save for education, the proposed MAGA accounts would function as a federal program with different rules and restrictions. The legislation is being led by Texas Senator Ted Cruz, who is expected to defend it as the tax bill moves through Congress. While there is a history of bipartisan support for children's savings initiatives, some Democrats have raised concerns about the funding of the broader tax bill, particularly with respect to proposed cuts to Medicaid and environmental programs.



What are MAGA savings accounts for kids?

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