Posted by 23 October 2018
New Jersey Senator Cory Booker thinks that he has a way to address inequality in the U.S. He recently proposed a bill that would establish savings accounts for every child born in the U.S. To pay for these “Opportunity Accounts,” booker would increase a variety of taxes, including the estate tax.
Under Sen. Booker’s plan, every child would receive an “Opportunity Account” at birth, but after that the federal government would provide payments into that account depending on family income. Those with the lowest incomes would receive $2,000 a year. Those with higher incomes would receive a lesser amount. Children in families with incomes over 500% of the federal poverty level would not receive yearly payments. The money in these accounts could not be used until the child turns 18, and then it could only be spent on certain things such as college tuition or a home down payment.
To pay for the estimated $60 billion price tag, Senator Booker’s plan calls on the federal estate tax rate to be set between 45% and 65%. He would also increase the capital gains tax rate.
The idea behind these accounts is to provide low-income Americans with a nest egg that is similar to what wealthier Americans already enjoy. Senator Booker argues that this would allow wealth creation by these lower-income families, especially minorities. Supporters of the accounts contend that past government policies prevented minority families from taking actions that would have allowed them to accrue wealth, so this is a way to help right those wrongs.
Those opposed to Senator Booker’s plan argue that the high estate and capital gains tax will hurt the economy by taxing productive economic activity. They note that people will take action to avoid the very high estate tax rates, so his plan will likely need other sources of revenue to fund it.
Senator Booker’s plan is unlikely to be considered by the Senate. However, if Senator Booker runs for president in 2020, it may provide the basis for a national discussion on what government should do to help low-income families accumulate wealth.
Do you think the federal government should provide tens of thousands of dollars in an “Opportunity Account” for low-income children? Should the estate tax be increase to fund these accounts?