On July 4, the federal government launched what it describes as an ambitious wealth-building initiative for children. This new tax-subsidized savings program includes a $1,000 government-funded investment account for every eligible child born in the United States between Jan. 1, 2025, and Dec. 31, 2028, whose family opts in to receive an account branded as Trump Accounts.
The premise is straightforward: give every child an investment account, let compound returns do their work, and build wealth over time. The program has been heralded as a way to narrow America's wealth gap. But the evidence points in the opposite direction.
That matters in Rhode Island because our state has already begun building a different path. Through the Rhode Island Baby Bond Trust, state leaders recognized that wealth matters – but also that closing the wealth gap requires more than giving every child the same investment account.
New research from the Institute on Race, Power and Political Economy at The New School suggests Trump Accounts are unlikely to substantially reduce America's wealth gap. Based on what we know about tax-subsidized savings vehicles, they may actually widen it.
How can a program that gives every child the same $1,000 investment increase inequality? The government deposit is only the starting point. Families, employers, and philanthropies can contribute up to $5,000 annually until a child turns 18. Over nearly two decades, those contributions – not the initial government investment – will largely determine whether a young adult reaches adulthood with a few thousand dollars or tens of thousands.
We have seen this dynamic before.
For nearly three decades, 529 college savings plans have demonstrated that families with greater financial resources are better positioned to save, benefit from investment growth, and accumulate more wealth. Our research found that among lower-income families with young children, fewer than one percent own a 529 account, compared with nearly three in ten of the highest-income families. Almost all of the money held in 529 accounts belongs to higher-income families, and more than three-quarters belongs to the wealthiest 10 percent alone.
That is not a criticism of families who contribute. It is simply how compound investing – and a tax code that subsidizes it – works. Equal access to an investment account does not necessarily produce an equal opportunity to build wealth.
Trump Accounts operate under a similar structure. Families with resources can take greater advantage of tax-preferred savings opportunities. Families struggling to pay for rent, health care, groceries, and childcare simply may not have additional income available to contribute.
Rhode Island's Baby Bond Trust starts from a different premise.
Rather than relying on families to build wealth through additional savings, the trust is designed to make public investments in children born into families with fewer financial resources. The goal is not simply to encourage saving. It is to ensure more children begin adulthood with meaningful capital to pursue higher education, buy a home, start a business, or build long-term financial security.
Rhode Island has created the Baby Bond Trust to provide eligible TANF (Temporary Assistance for Needy Families) children born into families participating in Rhode Island Works with a publicly funded trust account at birth. Managed by the Rhode Island Treasury, those accounts are designed to grow over 18 years before being used for approved wealth-building purposes.
Creating the trust, however, was only the first step. To deliver on its promise, Rhode Island must now fully fund it. The state's 2025 Baby Bonds law positioned Rhode Island to launch a publicly funded, automatically administered wealth-building program for eligible newborns once appropriations are secured.
The launch of Trump Accounts should not distract us from that work. If anything, it reinforces why Rhode Island's approach matters.
Trump Accounts deserve credit for recognizing an important truth: wealth matters. But recognizing that wealth matters is not the same as ensuring every child has a meaningful opportunity to build it. Rhode Island can demonstrate an approach that recognizes unequal starting points and directs resources toward children who otherwise may have little opportunity to accumulate assets.
The question isn't whether every child deserves an investment account.
It's whether every child deserves a meaningful opportunity to build wealth.
James A. Diossa is Rhode Island's general treasurer. Darrick Hamilton is Henry Cohen Professor of Economics and Urban Policy, and founding director of the Institute on Race, Power and Political Economy at The New School.
This article originally appeared on The Providence Journal: When it comes to building wealth, equal isn't always equitable | Opinion