An Exclusive Look at Cory Booker’s Plan to Fight Wealth Inequality: Give Poor Kids Money

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Sen. Cory Booker (D-NJ) is introducing a bill aimed at closing that gap. His idea is to give lower-income kids a sizable nest egg (nearly $50,000 in some cases) that they could use for wealth-building purchases, like a down payment on a house or college tuition.

These “opportunity accounts” would, theoretically, make sure all children have significant assets when they enter adulthood, rather than just those who grow up in wealthier homes.

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Similar ideas have swirled around think tanks since the early 2000s, but Booker appears to be the first high-profile senator to introduce legislation to create such a program. As possible 2020 presidential nominees like Booker begin to unveil ambitious policy ideas — like Sen. Bernie Sanders’s (I-VT) Medicare-for-all plan or Kamala Harris’s (D-CA) new cash assistance plan — Booker appears ready to focus on racial inequality in America, and how to solve it.

Opportunity accounts, explained

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Specific government policies have driven the racial gap by making it specifically harder for minorities to accrue wealth. The decades-long practice of the Federal Housing Authority refuse to underwrite housing loans to many black families, for example, made it difficult for those families to pass on the earnings of real estate to their children the way a white family might.

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Booker’s proposal is meant to target young children who haven’t benefited from the type of situation he did.

His American Opportunity Accounts Act would give each child born in the United States a savings account with $1,000. Each year, until the child turns 18, the government would deposit as much as $2,000 into that account. The size of the annual payments would depend on the child’s family income, with lower-income families receiving larger checks.

These accounts would be off limits until the child turns at 18, at which point the child could use them for specific “asset-building” purchases, like a down payment on a house, for example, or college tuition. {snip}

Booker’s office estimates that a child who remains in the lowest income bracket of the program (meaning she gets the largest, $2,000 payments each year) would accrue $46,215 by her 18th birthday. {snip}

They also project that the benefits of the program would go largely to minority children. Their figures suggest that the average black child will accrue $29,038 in her account and the average Latino child would get to $27,337. The average white child would end up with about half that ($15,790).

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This seems in keeping with the rest of the field of 2020 Democratic hopefuls, who are starting to roll out policies that would greatly expand the public safety net and constitute a significant wealth distribution from the wealthy to the poor.

These range from Sanders proposing a government-run health care system to cover all Americans to Harris’s new plan to give low-income families as much as $500 in monthly cash assistance.

Booker would pay for his opportunity account program by increasing capital gains and estate taxes — two changes that would target directly America’s wealthier families.

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[Editor’s Note: The original story contains some comparison charts.]