This week, the House Ways and Means Committee is “marking up” the tax provisions that will make up the House of Representatives’s version of the omnibus reconciliation bill, which President Donald Trump and Republican leaders want to become law this summer.
The Joint Committee on Taxation estimates that the House version of the looming reconciliation bill would increase deficits by $3.8 trillion over the next decade. This would be fiscally irresponsible. The total federal deficit today equals almost 100% of GDP, and for fiscal 2025, it will exceed 6% of GDP. The reconciliation bill will further increase the federal deficit, raise interest rates, and reduce long-term economic growth.
Tucked away in the House Ways and Means proposed tax portion of the reconciliation bill is a relatively modest spending measure, a provision for the federal government to create and fund at birth, a $1,000 private tax-advantaged account for every American child. This Money Account for Growth and Advancement is otherwise known as a MAGA Account. Sen. Ted Cruz (R-TX) is the principal architect of this tax proposal.
At birth, $1,000 would be invested in a low-cost stock index fund such as the S&P 500, the benchmark measure of the United States stock market. Each year, parents, other relatives, and employers of the parents of the child could contribute up to an additional $4,000 into the child’s account. The monies invested by the federal government and others would not be subject to tax until the funds invested were withdrawn at the age of 18 or as late as 30. When the funds were withdrawn, taxes would be imposed at the rate of long-term capital gains, in the range of 15-20% at today’s rates. The monies withdrawn could be used for education, to buy a house, a car, or other legislatively specified uses.
It sounds good. The problem is that this would be yet another tax giveaway. Why should a gift of free money be taxed at a lower rate than the tax on income earned from honest labor? The additive negative effect of this policy is also a familiar one: it would increase the federal deficit. It would be yet another way for more affluent taxpayers to give their children money in a tax-advantageous manner.
The proposed newborn tax-advantaged account would also increase the size of the already too large welfare state. Republicans control Congress and the White House. Republican lawmakers describe themselves as conservatives, but their actions here are anything but conservative. Through this specific proposal and the overall reconciliation bill, they spend like the far left. They further entrench the welfare state.
The purpose of America is liberty, including the freedom to strive for economic success. Receiving something for nothing is inconsistent with the culture that made America economically exceptional across the world.
FAIRFAX COUNTY DEMOCRATS EMBRACE HIGHER TAXES AND WASTE
Children model the behavior of their parents and others. Children should learn to model the behavior of hard-working strivers who, each day, save for their futures. Deferred gratification, self-reliance, and self-responsibility are central to American culture.
In this era of reckless spending by the federal government, Republican lawmakers are wrong to keep filling the putrid swamp of Washington with yet another tax giveaway. After all, didn’t Trump promise to drain the swamp?
James Rogan is a former U.S. foreign service officer who has worked in finance and law for 30 years. He writes a daily note on the markets, politics, and society. He can be followed on X here. He can be reached at [email protected]
