“MAGA Accounts,” we hardly knew ye. Hello “Trump Accounts,” the new name Republicans came up with at the 11thhour for the new savings accounts that will seed every seed $1,000 to every American baby born between Jan. 1, 2025, and Jan. 1, 2029, as part of a provision in the massive “One, Big Beautiful Bill” that narrowly passed in the U.S. House of Representatives early Thursday.
The sweeping tax and spending bill passed in the Republican-controlled House in a 215-214 vote after a marathon push that kept lawmakers debating the bill through two successive nights. All House Democrats and two Republicans voted against it, while a third Republican voted “present,” and another Republican missed the vote because he was asleep.
“This is arguably the most significant piece of Legislation that will ever be signed in the History of our Country! The Bill includes MASSIVE Tax CUTS, No Tax on Tips, No Tax on Overtime, Tax Deductions when you purchase an American Made Vehicle, along with strong Border Security measures, Pay Raises for our ICE and Border Patrol Agents, Funding for the Golden Dome, ‘TRUMP Savings Accounts’ for newborn babies, and much more!” President Donald Trump posted on Truth Social early Thursday.
House Republicans made several last-minute changes to secure enough votes to pass the bill, but one of the most curious (and perhaps more to secure favor than votes) was the name-change for the new savings accounts for newborns.
Originally dubbed “MAGA Accounts,” which Republicans said stood for “Money Accounts for Growth and Advancement” rather than the president’s “Make America Great Again” slogan, the late name change to “Trump Accounts” that bewildered some House Democrats occurred during a House Rules Committee meeting Wednesday evening.
Sen. Ted Cruz (T-TX), who is widely credited with getting the provision into the bill, told Business Insider that he doesn’t mind the renaming. “What I care is that they remain in there,” Cruz told BI, referring to the provision’s inclusion in the larger bill. “I think it doesn’t matter what they’re called. What it matters is what they do.”
How Trump Accounts work
Assuming the provision survives any changes to the bill in the Senate and it goes on to pass and become law, the Trump Accounts that will seed newborns with $1,000 funded by the Department of the Treasury will also allow family, friends and even employers to contribute up to $5,000 a year. Funds will be invested in a diversified fund that tracks a U.S. stock index such as the S&P 500. The program is estimated to cost $4 trillion.
Similar to a 529 college savings plan, the Trump Account provides a tax incentive to getting a jump start on saving. Earnings grow tax-deferred, and qualified withdrawals (including for education expenses or credentials, a down payment on a first home or as capital to start a small business) will be taxed at the long-term capital-gains rate.
The money in each child’s account would accumulate interest and value so by the time accountholders are eligible to receive distributions upon turning 18, they would have tens of thousands of dollars available to use on education, start a business or buy a home.
“A baby that is born this year that starts with the initial $1,000 seed contribution, over the next 18 years, if $5,000 a year is contributed, at 7% growth, by the time they’re 18 they have $170,000 in this account. By the time they’re 35 they have $700,000 in this account. I believe this will be a transformational policy,” Cruz told CNBC’s Squawk Box last week.
“It’s a 401(k) for kids,” Cruz said. “Think about how 401(k)s have changed our society. One of the really powerful things is I think a lot of employers—when this is passed—will find it a very attractive benefit to give to their employees to say, ‘hey, we’re going to match your contribution to these investment accounts for your kids or we’re even going to seed them, just like they do with 401(k)s,” Cruz said. “What I’m interested in is giving these kids the ability to climb the economic ladder much, much faster to accumulate wealth.”
There are no income requirements and everyone is eligible, as long as the child is a U.S. citizen, and both parents have Social Security numbers.
Speaking of Social Security, the tax bill does not end the tax on Social Security benefits—another Trump campaign promise—but it does provide a $4,000 deduction for older adults of certain income levels, to help offset taxes on their Social Security income.
Social Security programs cannot be changed through this budget reconciliation process, making a provision ending the tax on Social Security a non-starter for inclusion in the One Big, Beautiful Bill.
But the “enhanced deduction for seniors” gives an extra $4,000 deduction for people over 65 filing their taxes. This is per person, so married couples filing jointly would get an $8,000 boost to their standard deduction. The limited time break is subject to income limitations.
Intended for low-to-moderate income retirees, it would start to phase out at modified adjusted gross income levels above $75,000, or $150,000 for married couples.
Under current law, as much as 85% of Social Security benefits can be taxable, depending on income. According to the Social Security Administration, about 40% of Social Security recipients pay some federal income tax on their benefits.
What’s next for tax bill
Clearing the House, Trump’s “One Big, Beautiful Bill” now heads to the Republican-controlled Senate, where it will likely see further changes during what is expected to be weeks of debate.
Among many other things including Trump Accounts, the 1,100-page bill would extend corporate and individual tax cuts passed in 2017 during Trump’s first term in office while adding new ones Trump campaigned on during the 2024 presidential campaign. But among primary concerns about it are how it would potentially add to the national debt.
The Committee for a Responsible Federal Budget, a nonpartisan fiscal watchdog group, estimates that the House bill is shaping up to add roughly $3.3 trillion to the debt over the next decade. The Congressional Budget Office (CBO) estimates that the proposed bill would increase the federal deficit by approximately $2.3 trillion over the next decade. If the expiring provisions of the bill are extended, the CBO estimates it would add $5.2 trillion to deficits through 2034.
The U.S. debt, which has reached 124% of GDP, prompted a downgrade of the United States’ top-notch credit rating by Moody’s last week.
SEE ALSO:
• ‘401(k) for Kids’ Included in New GOP Tax Proposal
• Bill to Make 401(k)s Available to 18- to 20-Year-Olds Reintroduced in Senate
• Trump Mulls Executive Order to Allow Private Equity in 401(k)s