Overview

• The Senate is debating a GOP-backed proposal to create tax-advantaged savings accounts seeded with $1,000 for babies born between 2025 and 2028 and open to annual private contributions up to $5,000.
• Experts at the Urban Institute caution that the structure favors affluent families who can maximize contributions and that penalties and restricted access will limit benefits for low-income households.
• Critics note the proposal overlaps with existing tax-preferred vehicles such as 529 plans and IRAs and does not expand child tax credit eligibility for the poorest families.
• Sen. Cory Booker and Rep. Ayanna Pressley have offered a competing baby bond plan featuring income-based federal deposits and progressive annual contributions to more effectively close the wealth gap.
• Lawmakers must reconcile these debates and approve the broader tax and spending package by July 4 for the House-passed measure to proceed toward final enactment.