A few months ago, my daughter’s Trump Account was seeded with an initial $1,000 investment. Along with millions of other children eligible for this pilot program, these funds give her a head start on the future. As bold letters headlining the Trump Accounts website said, “The American Dream Starts Now.” It’s a statement that’s hard to dispute.
These accounts will create countless opportunities and help millions achieve their dreams. There’s a reason this initiative has attracted widespread bipartisan support — it’s not easy to oppose building future wealth. But while it’s a good start, more action must be taken to effect real change. Lawmakers need to shift their focus toward another tax-advantaged account that is already in existence: education savings accounts or 529s.
Stay informed.Stay ahead.
Join Washington Examiner for unlimited access to the news, analysis, and commentary that matter most.
Already a member? Log in
Education has always given people the best shot at getting ahead. It paved the road from the log cabin to a real home, and served as the most effective weapon in the war against poverty. Well-educated people enjoy better salaries, lower crime rates, and higher life expectancies than those of a lesser educational background.
The problem is, educating one’s child is never free — even within the public school system. With the start of the new school year, parents expect to spend, on average, close to $1,000 on back-to-school expenses. For a family with a number of school-age children, this adds up to a significant financial burden. But this is far from the only cost associated with education.
While polling data show that many parents want to send their children to after-school programs, most cannot afford to. The same goes for vital tutoring and summer programs. Despite being critical components of a child’s education, the cost is prohibitive. This is true for parents across a range of income levels. And this is only within the public school system. For those who find it necessary to send their children to private school — including many lower and middle-income families — the price is astronomical. For many people, the gift of a good education is slipping out of reach.
Putting more taxpayer dollars into the system isn’t the solution. Past results speak for themselves. Getting the funds to those who most need them is a task likely to fail. Just look at New York and Washington, D.C. They spend more per capita on education than almost anywhere else in the nation and have little to show for it. Instead, the time has come for a paradigm shift in how people can save for education.
Despite the predictability of most educational expenses, many parents are caught unaware and unprepared when the need arises. That’s because while saving for education is encouraged, the emphasis is mainly on putting away money for college. But there isn’t much of a focus on ensuring that a child has the resources to get to that point.
While 529s and ESAs exist, their primary benefit comes from tax-free investment gains. That is a significant limitation for many parents, especially for those with children in lower grades. They don’t have the wherewithal for a long-term investment plan, nor can they afford to contribute after-tax dollars. If these accounts are to be useful to the average person, they need to offer more. Health savings accounts provide a good model to look at.
Since they were first implemented in 2004, HSAs have been transformative for people facing surging healthcare costs. The triple-tax benefit offered allows younger, healthier people to save and invest for future medical needs. At the same time, it serves as a hedge against skyrocketing premiums for health plans offering less coverage. At a minimum, education should have a similar option.
Right now, parents are being double-taxed: paying taxes to fund their children’s education while simultaneously shouldering the burden of additional out-of-pocket educational expenses. Allowing tax-free contributions would provide immediate financial relief for parents, and open new pathways of opportunity for children.
TRUMP IS RIGHT ABOUT THE ABA — AND WE HAVE THE RECEIPTS
But this isn’t the only modification necessary to keep these accounts relevant to the average person. Current rules only allow an education tax-advantaged account to be opened once a child is born. That should change. People should be allowed — and encouraged — to save for their future children’s educational expenses. Anyone planning to build a family should have the ability to plan for their family’s future.
Our country’s greatest resource is American ingenuity. It’s what has opened the door to prosperity, given way to the American dream, and secured our standing as the world’s sole superpower. Education has been central to this success, and holds the key to future greatness. When we invest in our children, we invest in our future. Creating these accounts will unlock potential, expand opportunity, and help secure our nation’s future.
Menachem Joel Spiegel is a Yeshiva student and freelance writer whose work has appeared in the Wall Street Journal, the Hill, the New York Daily News, RealClearMarkets, the Star-Ledger, the Jerusalem Post, and other outlets. Spiegel has published two books about Jewish history and thought.