Trump’s $1,000 Baby Bonus Plan Draws Mixed Reactions from Experts

A Republican-led tax and spending proposal featuring a $1,000 federally funded baby bonus through new “Trump Accounts” is advancing in Congress, drawing both praise and skepticism from policy and financial experts.

Unveiled during the White House’s “Invest America” roundtable, the Trump Accounts initiative—previously labeled “MAGA Accounts”—would grant every U.S. citizen child born between January 1, 2025, and January 1, 2029, a one-time $1,000 deposit from the U.S. Treasury. The funds, invested in a diversified U.S. stock index, grow tax-deferred, with qualified withdrawals taxed at the long-term capital-gains rate.

Kid receiving money | Source: Pexels

Top business leaders, including Michael Dell and Goldman Sachs CEO David Solomon, voiced support, with Dell pledging to match the government contribution for employees' children.

Eligible uses for the accounts include education, first-home down payments, and small business capital. Parents and others may contribute up to $5,000 annually.

Sen. Ted Cruz (R-Texas), who championed the provision, described it as “transformational,” enabling children to “accumulate wealth” early in life. A White House statement echoed the sentiment, calling it a pathway to “compounded growth and prosperity.”

Kid putting money in a piggy bank | Source: Pexels

Yet critics caution against high costs and complexity. Mark Higgins of Index Fund Advisors noted the initiative could add over $3 billion annually to the deficit. “It’s not sustainable,” he said.

Financial advisors also point to existing options such as 529 college savings plans, which offer higher contribution limits and tax-free withdrawals for educational use. “For most parents… the 529 plan is superior,” said Winnie Sun of Sun Group Wealth Partners.