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One of the most consequential new proposals in the House GOP’s massive tax plan may carry a Donald Trump-inspired name — but it’s Ted Cruz’s brainchild.
The “money account for growth and advancement,” otherwise known as a “MAGA Account,” surprised plenty of tax policy mavens when it appeared in the long-awaited Republican bill released on Monday. It popped up, however, thanks to more than a year of intraparty advocacy by the Texas GOP senator.
Cruz initially used the name “Invest America” for his idea to seed tax-advantaged investment accounts with $1,000 for every newborn baby with a Social Security number, naming it after the coalition of businesses and philanthropists pushing the idea. It got a Trump-friendly rebrand on its way to the House Ways and Means committee’s tax cut measure; Cruz doesn’t mind that at all.
“You can call it anything you like. What is powerful is enabling every child in America to have an investment account and a stake in the American free enterprise system,” he told Semafor in an interview on Monday, after spending last week pitching his colleagues directly on it.
The basic idea is this: The money in each US child’s account can accumulate interest and value by investing in equities while friends, family and employers are free to contribute up to $5,000 annually. By the time accountholders are adults, they would hold onto their tens of thousands of dollars in gains to use on education, start a business or buy a home.
After months of discussions with House Speaker Mike Johnson, Ways and Means Chair Jason Smith and the White House, Cruz said the inclusion of his proposal in the party’s first draft is a big step toward a tax bill with “legacy” provisions that voters will notice for the long term. The president “weighed in directly to include this provision,” Cruz said.
He added that his plan’s “multifold” purpose would eventually allow all Americans “to experience the miracle of compound interest” and “help produce new capitalists.”
“There are many Americans who don’t own stocks or bonds, are not invested in the market, and may not feel particularly invested in the American free enterprise system. This will give everyone a stake,” Cruz said.
The first draft of the House’s tax legislation would tax distributions from the account at the capital gains rate, according to a committee summary. It also differs sharply from previous Democratic proposals for “baby bonds” proposals that would not allow investments in the private equities markets.
“That is just a government program, where this is very much designed to get the next generation to invest in the market,” Cruz said of the Democratic idea.
“You see a lot of young people who in public opinion surveys, say they have a negative view of capitalism and they embrace socialism,” he added. “And what is powerful about this is, when every child has invested, it’s no longer an abstract idea.”
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Cruz attended the Milken Ideas Conference in Los Angeles last week and said there were “multiple CEOs enthusiastic about the transformational impact of this idea.” One potential way to leverage the accounts is a matched contribution from employers that would turn the newborn accounts into, essentially, a 401k for kids.
The program’s success in part rides on business leaders cooperating with employees to buy into it.
On CNBC last week, Brad Gerstner of Altimeter Capital said that several larger companies like Uber, Dell, Nvidia and Oracle have said “they’ll contribute to the accounts of the kids of their employees.” Gerstner and Cruz said major philanthropists are also lined up to support the idea.
“This is essentially a 401k for every newborn in America, and just like with 401ks, employers have seen it is a very attractive benefit for their employees to match or help seed those savings accounts,” Cruz said.
Still, he acknowledged that Republicans have lots of work to do to educate the public about the new program. He said the House’s draft of the accounts could be further revised.
Burgess’s view
Cruz is right to not declare victory too early on his big idea: His project now needs to survive votes in both chambers of Congress and potential cross-Capitol talks ahead of a final GOP deal.
But getting the legislation in the party’s initial draft is a notable victory for Trump’s onetime presidential rival.
Room for Disagreement
Democrats are marshaling fierce opposition to the overall Republican tax package, which would lead to Medicaid health insurance coverage losses if the initial House GOP draft holds.
That said, at least one of them gives Cruz a reluctant plaudit for his idea.
“Even a stopped watch” is right twice a day, Senate Minority Leader Dick Durbin, D-Ill., told Semafor.
“Overall, right now, when it comes to helping working families with the expenses of life, there are precious few examples when it comes from Republicans,” Durbin added, noting that the GOP’s proposed Medicaid cuts “would be devastating across my state.”
Notable
- BlackRock CEO Larry Fink endorsed the idea of private investment accounts to supplement Social Security during a March interview with Semafor.