When you hear MAGA, perhaps you think of the slogan used at President Donald Trump's rallies or the distinct red hats worn by his supporters. A new tax bill introduced in Congress, however, uses MAGA to refer to savings accounts for children.
In this context, MAGA stands for Money Account for Growth and Advancement. This proposal offers every American born from 2025 to 2028 a $1,000 deposit into their own dedicated savings account. These accounts come with tax advantages and benefit from compounded interest over time. Family, friends, and even employers can contribute up to $5,000 annually, but children will be unable to access these funds until they turn 18 years of age.
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Investments and savings plans for young children have long been a practice among wealthier families, and this initiative aims to make such practices more accessible to everyone. However, there are specific limitations on how the funds can be spent.
"Qualifying expenditures under this new account would be education, as well as purchasing a new home," said Erica York, vice president of federal tax policy at the Tax Foundation.
Currently, every state except Wyoming provides 529 plans, which are investment accounts intended to assist families with educational expenses. While this new federal savings program differs from 529 plans, York notes it lacks key incentives like tax deductions for ongoing parental contributions, and a one-time $1,000 deposit might not stretch far enough to cover college tuition or a down payment on a home.
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Republican Sen. Ted Cruz has been a fierce advocate for MAGA savings accounts, positioning himself as a key supporter of the program as it enters scrutiny. While Democrats have historically not opposed children’s savings initiatives, many are raising concerns over how this tax bill is financed, particularly through cuts to Medicaid and alterations to climate policy.
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