Legislation recently introduced in the U.S. Senate would establish a private tax-advantaged account for every American child at birth with a $1,000 seed investment from the federal government.
The Invest America Act would create accounts that would be open to contributions from individuals, family members, friends, and businesses up to $5,000 annually. Investments would be placed in a broad, low-cost fund that tracks the S&P 500. The accounts would be tax-deferred until the account holder reaches 18 years old. Distributions after that would be taxed at the capital gains rate.
“The Invest America Act will trigger fundamental and transformative changes for the financial security and personal freedoms of American citizens for generations,” U.S. Sen. Ted Cruz (R-TX), who introduced the bill, said. “Every child in America will have private investment accounts that will compound over their lives, enhancing the prosperity and economic participation of the vast majority of Americans.”
The House Ways and Means Committee budget package released on Monday included a version of the bill.
The bill has the endorsement of Dell Technologies and Altimeter Capital.
“When everyone realizes they can be an owner, it unites our country around free-market principles and unleashes the next generation of American success,” Brad Gerstner, Altimeter Capital founder, chairman and CEO, said.