This week, House and Senate Democrats put forward a bill that would have the federal government create a $1,000 "seed savings account" for anyone born after 2005.
The bill's sponsors claim it is intended to help reduce the racial wealth gap in America. They would also provide contributions to these accounts until the person turns 18.
This piece of legislation, if approved, would transfer a large sum of money from the wealthy, as the bill would raise estate tax revenues in order to provide for the program.
Sen. Cory Booker of New Jersey and Rep. Ayanna Pressley of Massachusetts proposed the "baby bonds" bill, which would provide children from the lowest income families up to $2,000 annually. This amount would gradually decrease as the family's income rises, and they make more than 500% of the federal poverty level, at which point the kids would receive just the initial $1,000.
Its estimated that by the time they reach 18, children in the lowest-income families will have amassed $46,000 that they can use for college expenses or to purchase a home. Booker has declared that this plan aims to rectify the "wealth inequality" in our society.
Pressley was more specific in her intentions and mentioned that the bill would be beneficial for "Black and brown folks."
In a statement introducing the bill, she declared "The racial wealth gap in America is the result of generations of precise and intentional policy violence, so we must be as intentional and as precise about advancing policies that address it head on."
Baby Bonds are one of the most effective tools we have for closing the racial wealth gap and breaking the cycles of poverty and trauma that have prevented Black and brown folks from thriving in this country, so it is no surprise that this idea has gained traction in states across the country."
"Black lives and Black wealth matter, which is why Congress must pass our bill without delay," Pressley added.
This week, information published by Pressley's office showed that the median net worth for black households in her district is $8, whereas white households in the same area have a median net worth of approximately $250,000.
"These disparities were created by generations of government policy, contributing to the national racial wealth gap," was the statement from her office.
It is estimated by Pressley's office that Black and Latinx families of lower-economic standing would receive larger "baby bond" contributions in comparison to White families. The median Black child would have $29,800, the Latinx child $22,300, and the median White child $11,690 by their eighteenth birthday.
The Democratic party has stated that the costs of the bill would be covered by increasing the taxes associated with estates and inheritances. Booker and Pressley have declared that the estate tax levels should be set to those of 2009.
In the given year, no levy was imposed on estates with a worth of up to $3.5 million, and any amount greater than that was subject to a tax of as much as 45%.
For 2022, the first $12 million of an estate was exempt from taxation, while any amounts exceeding this exemption were taxed at a rate of 40%.
The IRS has gathered a total of $18 billion in estate taxes this year, according to the Tax Foundation.
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