Booker, Pressley Reintroduce Bicameral “Baby Bonds” Legislation to Tackle Wealth Inequality

Bill Comes as Baby Bonds Programs Gain Traction in Cities and States Nationwide

WASHINGTON, D.C. – U.S. Senator Cory Booker (D-N.J.) and U.S. Representative Ayanna Pressley (D-MA) today reintroduced the American Opportunity Accounts Act, legislation that would create a federally-funded savings account for every child in order to make economic opportunity a birthright for everyone in America and help close the racial wealth gap. The lawmakers’ bill comes as baby bonds programs gain traction in cities and states nationwide.

The American Opportunity Accounts Act, also known as “baby bonds”, would give every child a fairer chance at economic mobility by creating a seed savings account of $1,000 at birth. The funds would sit in an interest-bearing account that would receive additional deposits each year depending on family income. At age 18, account holders could access the funds in the account for allowable uses like buying a home or paying for educational expenses. The legislation is fully paid for by making common sense reforms to federal estate and inheritance taxes, including restoring the estate tax to 2009 levels.

“Americans today are having a harder time accessing homeownership, higher education, and a secure retirement than their parents did just a generation before them,” said Senator Booker. “This is due in part to our upside-down tax code, which is great at preserving and building wealth for corporations and wealthy families, but fails Americans who are barely getting by and are unable to afford long-term investments to get ahead. ‘Baby Bonds’ would fix our broken tax code by providing every American child with startup capital for their life, and helping to drive down the wealth inequality that holds American families back from their full potential. With more cities and states across the country establishing their own ‘Baby Bonds’ programs,  I’m excited for the potential of American Opportunity Accounts to build a foundation for economic opportunity for all Americans, while breaking the generational cycles of poverty for underserved communities in the process.”

“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,” said Representative Pressley. “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.”

Wealth is primarily passed down from one generation to the next, and our history and laws deepen rather than shrink wealth inequality. Generations of subsidizing the richest households have entrenched an extraordinary wealth gap, especially by race.

The gap in wealth between the richest Americans and the middle class has grown dramatically in the past 50 years. In 1963, families near the top had six times the wealth of families in the middle; by 2016, they had 12 times the wealth. There is also a pernicious racial wealth gap in America. In 2016, the median black family had about $17,000 in wealth compared to the typical white family who had about $170,000.

Specifics of the American Opportunity Accounts Act:

At birth, every American child would be given an “American Opportunity Account” seeded with $1,000. Each year, children would receive up to an additional $2,000 deposit into their American Opportunity Account, depending on family income. These funds would sit in a federally insured account managed by the Treasury Department, achieving roughly 3 percent interest. Account holders may not access the money until they reach age 18 and will only be able to use the funds for allowable uses like homeownership and higher education — the kind of human and financial capital investments that changes life trajectories.

Estimated of size of American Opportunity Account at Maturity, by household income:

The bill is cosponsored by: Senators Dick Durbin (D-IL), Ed Markey (D-MA), Jeff Merkley (D-OR), Elizabeth Warren (D-MA), Bernie Sanders (I-VT), Sherrod Brown (D-OH), Richard Blumenthal (D-CT), Chris Van Hollen (D-MD), Brian Schatz (D-HI), Sheldon Whitehouse (D-RI), Chuck Schumer (D-N.Y.), Tammy Baldwin (D-WI), Amy Klobuchar (D-MN), and Kirsten Gillibrand (D-N.Y.).

The list of endorsing organizations can be found here.