Michael and Susan Dell just pledged $6.25 billion to expand Trump’s child wealth accounts, but design flaws mean the largest benefits still flow to wealthy families – not those who need them most. Their money will add $250 to the new federal “Trump accounts” for 25 million children under age 10, complementing the government’s $1,000 deposit for every baby born between 2025 and 2028.
The Dells deserve praise: they chose children, insisted on universal eligibility within an age group, and framed their effort as a pilot that should be evaluated and improved.
But the mechanism they’re using—the Trump account structure—carries the familiar imprint of American tax policy: a progressive-sounding benefit layered onto a framework that ultimately favors the already-wealthy
The tension is not Dell’s motives, which appear admirable, but whether charity vehicles effectively delivers opportunity.
Trump Accounts Have Seeds In A Long-standing Progressive Policy Idea
The Trump accounts were created in the “One Big Beautiful Bill Act” as a new kind of custodial IRA for children, sometimes called 530A accounts. The Treasury deposits $1,000 for every U.S. citizen baby born from January 1, 2025, through December 31, 2028, once they get a Social Security number.
The Dells’ donation expands the program by providing $250 to children 10 and under who don’t qualify for the federal $1,000 because they were born before 2025. According to the Washington Post, their gift is intended to reach 25 million such children. T
The idea behind both the federal seed and apparently the Dell expansion is classic baby-bond logic: give every child a small financial asset at birth (or early in life) to help pay for education, buy a first home, or start a business. That notion has deep roots on the progressive side of the spectrum in “baby bonds,” as developed by William Darity Jr. and Darrick Hamilton—an “economic birthright to capital” that is larger for poorer children, precisely to counter the racial wealth gap.
Trump accounts borrow the branding and some of the rhetoric of baby bonds. They do not borrow the most important design features.
Trump Accounts Bypass the Middle Class
Ashlea Ebeling’s and colleagues explainer in The Wall Street Journal is the best technical description of these accounts so far. In brief:
Under current law, a Trump account is a custodial IRA for a child with special rules until the year they turn 18. The $1,000 Treasury seed grows tax-deferred – which helps those with higher tax rates and has hardly any benefit for low income people who pay small federal income tax rates. Withdrawals are taxed as income, which is progressive but the penalties triggered — unless used for certain purposes, such as higher education or a first-home purchase, and is used for a car or past rent is regressive..
Another source of regressivity is that parents, relatives and friends can add up to $5,000 per year (after-tax dollars), indexed to inflation. Those at the top have relatives and friends with the ability make significant contributions
Employers can contribute up to $2,500 per year per child, also indexed. But half of workers don’t have employers who contribute to their retirement funds so its is not likely employer contributions will be widespread. Charities – like wealthy families personal foundations can contribute, but only on equal terms for a defined class of children (say, all children born in a city in one year). This has uncertain equity effects.
It is uncontroversial that the funds must go into low-cost mutual funds or ETFs, mostly U.S. equities, with an expense ratio cap of 0.10%. The regressivity comes how expected behavior of household interacts with the tax code. The seed money, employer contributions, and charity contributions all count as earnings for tax purposes. That makes distributions mechanically complex: every withdrawal is partly taxable, and some uses trigger a 10% penalty before age 59½.
Financial planners quoted in the same WSJ piece are blunt: for most families, a 529 plan, a Roth IRA for working teens, or even a plain taxable brokerage account is more flexible and tax-efficient than pouring additional family money into Trump accounts. Only wealthy families who have already maxed out other tax-favored vehicles may see these accounts as a useful extra shelter.
Even economists generally favorable to tax-based saving incentives point out that Trump accounts are unusually complicated. At AEI, Alan D. Viard – hardly a progressive critic – warns that the biggest benefits accrue to those who can contribute most. Wealthy people. In other words: the free $1,000 (or Dell’s $250) is simple and progressive. The rest of the structure is not.
The Wealthy Will Use The Annual $5,000 Allowance
The crucial question is not whether every child deserves a starter asset. They do. The question is which families can realistically layer another $5,000 per year, per child into a specialized account with tricky tax rules.
Here is where the distribution of wealth matters to answer the question who benefits from the Trump accounts. We don’t have an official estimate of what share of all children under 10 live in, say, millionaire households,” but it is safe to say this: only a minority of children will have relatives and employers who can consistently add $5,000 a year into a Trump account after the free seed money. For many, the account will remain a $1,000 or $1,250 stub plus market returns, not nothing, but hardly transformative.
By contrast, a child whose relatives and friends can contribute the full $5,000 each year for 18 years, and whose employers chip in are clear beneficiaries. For that small group, the Trump account is one more tax-advantaged asset wrapper layered on top of 529 plans, retirement accounts, home equity, capital gains, and business ownership.
That is the classic pattern of American tax policy: the structure says “for everyone,” but the practical benefit scales almost linearly with how rich your family and their friends already are.
Trump Accounts Are Not Baby Bonds
Economists Darrick Hamilton and William Darity’s baby bond proposal takes the opposite tack: make the accounts bigger for kids from poorer families, not smaller. Their original design envisions a public trust account for every newborn, with balances between about $500 and $50,000, inversely related to family wealth.
The goal is explicitly to confront the racial wealth gap produced by centuries of unequal access to property, credit and protected assets. As Hamilton and coauthors put it isn’t effort or education that primarily separates Black and white families, but the “unearned birthright” of inheritance and family transfers.
Trump accounts, even with Dell’s expansion, do not target children who have the least wealth behind them. They do not vary deposits by family wealth. And the tax rules surrounding additional contributions are optimized for the families best positioned to exploit them.
If you strip away the branding, Trump accounts look less like baby bonds and more like another entry in the long history of upside-down tax expenditures, where the biggest dollar benefits flow to those in the highest brackets.
A Brief Personal Note: What Effective Help For Children Look Like
For many Americans of my generation, the closest thing we had to baby bonds in the 1970s was public policy itself. In my case, that meant essentially free tuition at the University of California, Berkeley, and Medicaid coverage that paid for the asthma care my family could not have afforded on its own. Those two pillars – education and health– were my starter asset that gave me hope and aspiration.
I would not have gone college, let alone become an economist, if I had been waiting for relatives to put $5,000 a year into a dedicated investment account. The “capital” that mattered was social and in the form of an excellent collective, not familial.
That perspective shapes how I see the Trump accounts: the $1,000 universal grant is good, modest policy; the surrounding tax shelter is an expensive distraction.
Where Dell’s Generosity Could Lead
None of this is an argument against what Michael and Susan Dell have done. Their donation is real money, and they are not wrong that “the point of all of this is to create hope and opportunity and prosperity for millions of children,” as Michael Dell told the Washington Post. But its not right that $250 provides rational the hope to escape poverty or get an excellent education or insure against unemployment or eviction.
But philanthropy has never been able to scale and not fix a flawed policy design. In some ways, it can entrench it by creating a powerful constituency for keeping the structure intact—even if better, simpler options exist.
A more promising path would be to use this moment to push for a true, income-graded baby bond at birth, along the lines Darity and Hamilton originally proposed, with automatic enrollment, public administration, and balances that are explicitly larger for children from low-wealth families. And the Trump accounts pilot needs to answer how often contributions are made, and which children benefit most—data that should be public and disaggregated by income and race.
Dell’s gift has bought the country something precious to be grateful for: time and attention to shared values: every child—no matter their parents’ balance sheet — gets a meaningful leg up.
And at another time, we need to discuss the coming retirement income crisis that Trump accounts won’t touch. The Trump accounts may be a trial balloon for a larger political campaign to weaken Social Security. In July 2025, Trumps Secretary of the Treasury Scott Bessent described Trump accounts as a “back door for privatizing Social Security.” Privatizing Social Security is widely recognized , if implement, to likely raise elderly poverty rates and increase financial risk borne by the elderly disabled and their dependents, making the retirement crises worse, not better.